The company is the leading enterprise of foaming materials in the industry, of which structural foam income accounts for 47%, post-addition business income accounts for 33%, and soft foam income accounts for 20%. Structural foam is the company's main product, downstream is mainly wind power blades, production capacity of 7000 tons, accounting for about 22% of the world, showing an oligopoly pattern.
Main points of investment:
There has been an inflection point in the global wind power demand in the past 14 years, and it is expected that the change in supply and demand under the oligopoly pattern will make the structural bubble more likely to raise prices in the second half of the year. (1) GWEC forecasts that the growth rate of global wind power installed in 2014 will be as high as 34%, driving the demand for PVC structural foam to be about 28400 tons. (2) at present, three major companies in the world produce structural foam materials, with a total production capacity of about 32000 tons. Among them, DIAB cut production capacity by nearly 8000 tons last year, resulting in a reduction in global production capacity of about 20% and 30% at the supply end of structural foam, resulting in a two-way balance between supply and demand. (3) the continuous recovery of profits of downstream machine enterprises such as Sinopec, the company's largest customer, provides room for the price increase of structural foam materials; assuming that the price of structural foam increases by 20% in the whole year, the thickening EPS is about 0.16 yuan.
Through the mode of capital operation to cut into new markets, expand downstream while raising valuations. In January 2014, the company bought and sold 100% equity of Xin Xian Environmental Protection with 400 million yuan. By collecting and selling Xin Xian Environmental Protection, the company's product line extended from polymer foaming materials to post-plus products to railway, rail transit and other fields. Xinxian environmental protection promise that the net profit of shareholders belonging to the parent company after deduction from 2014 to 2016 is not lower than 226 million yuan, 36 million yuan and 58 million yuan respectively. Judging from the current outstanding orders, the probability of excess profits in 14-15 years is higher; the company will continue to enter new application areas through capital operations such as collection and peddling in the future.
Post-processing business is growing at a high speed, providing the company with abundant cash flow. In the past, the downstream customers of the company's post-plus business were mainly foreign enterprises, and the company will build a number of production lines in 2014 to increase the market share in the field of pre-learning film. In the future, the domestic market will become the main incremental market of post-plus business, with a 14-year revenue growth target of 60% 80%. The rapid growth of post-plus business will provide the company with abundant cash flow and provide guarantee for the subsequent launch of new products and capital operation.
From 2014 to 2016, the EPS of the company is 0.19,0.27,0.37 yuan respectively, and the corresponding PE is 41.32,29.49,21.69. the target price for the next 6-12 months is 10 yuan, which is given a "recommended" rating.
Risk hint: post-plus gross profit margin fell more than expected, global wind power recovery is lower than expected.