Performance is in line with expectations
In 2013, the company realized operating income of 743 million yuan, down 32.5% from the same period last year; the net profit of shareholders belonging to the parent company was-174 million yuan, and earnings per share was-0.22 yuan, in line with our expectations.
Trend of development
During the reporting period, the company faced many difficulties with frequent equipment failures in Tongliao Gold Coal in the first half of the year. 4 this parking maintenance, the operating rate was 54% low, producing only 89500 tons of ethylene glycol and 39300 tons of oxalic acid. In addition, although the demand of ethylene glycol industry is still strong and the price remains high, the substantial increase in fixed cost of Tongliao gold coal will affect the profitability of ethylene glycol at this stage. At the same time, the relocation compensation scheme of Danyang acetic anhydride continues to be promoted, which has affected the current profitability of the company.
Due to the sluggish market and the relocation of the government, Danhua acetic anhydride has stopped production. The closure and relocation are expected to be completed by the end of 2014.
Tongliao Gold Coal plans to invest 300 million yuan to expand the capacity of the existing plant and increase the ethylene glycol production capacity by about 100000 tons, which is expected to be postponed to this year. After the completion of the transformation, the current fixed cost of production will be greatly reduced and the product profitability will be improved. At present, the company is fully promoting the completion and acceptance of the first phase of the project and the relocation of the acetic anhydride plant in Danyang. In the follow-up, with the maturity of production technology and stable equipment, the company's profits may pick up.
Profit forecast adjustment
As the company's products are relatively single ethylene glycol and oxalic acid, market environment fluctuations have a negative impact on the company's stable profitability, so we maintain the company's profit forecast of-0.13 yuan in 2014 and forecast EPS-0.03 yuan in 2015.
Valuation and suggestion
Maintain the neutral rating and give the target price 6.1 yuan.
Risk
1, the trial run of coal-to-ethylene glycol project has encountered setbacks again; 2, the progress of Henan project is later than expected; 3, the downside risk of market valuation center.