This report is read as follows:
The company's two mainstream products, heat-shrinkable materials and radiation cross-linked cables, have significant market advantages, the substitution effect of new ceramic silicone rubber materials has become increasingly prominent, the development of new energy is about to enter the harvest period, and the two-wheel drive effect of new materials + new energy appears.
Main points of investment:
Cover and increase the rating for the first time. We estimate that the company's EPS for 2015-2017 will be 0.33 EPS 0.46 won 0.59 yuan (excluding the additional investment income from holding Changyuan Group). Based on the company's advantages in heat-shrinkable materials and cross-linked radiation cable products, as well as new growth brought by new materials / new energy business, combined with PE and PEG valuation methods, we give a target price of 21.81 yuan, overweight rating.
The heat-shrinkable material is the domestic leader, and the radiation crosslinked cable has obvious advantages. By means of asset mergers and acquisitions, joint ventures, applying for supply system certification and increasing the shareholding of Changyuan Group, the company accelerates the promotion of heat-shrinkable materials products into high-end markets such as electronics, nuclear power, aerospace and aviation, and improves the company's product pricing power in the industry. At the same time, thanks to the improvement of the service life and environmental protection standards of construction cables by the Ministry of Housing, as well as the rapid growth of market demand for medium-and high-end and special cables, the company's environmentally friendly radiation cross-linked cable products have significant advantages. the application space of the market is expected to continue to expand in the future.
Traditional power products are growing steadily, while new materials / new energy sources bring new growth. Benefiting from the tilt of power investment to the agricultural distribution network, we believe that the company's traditional medium and low voltage power products will maintain steady growth. The company's new material ceramic silicone rubber obtained the invention patent in 2014. At present, the cost of the new material continues to decline, and it is expected to replace the mica belt as the main insulation filling material of the cable, and there is a huge alternative market in the future. On the other hand, the company is actively promoting the development of wind power projects. at present, two wind farm projects have been approved with a total installed scale of 97.2MW. We expect to be connected to the grid in the second half of 2016, which will contribute more than 100 million in annual revenue.
Risk hint: the replacement of traditional products with new materials is lower than expected, and the development progress of wind power projects is slow.