The company is a leader in oxalic acid industry, with a total production capacity of 95000 tons of oxalic acid, accounting for 20% of the market share; for every 1000 yuan / ton increase in industrial oxalic acid price, we estimate that the company's earnings per share will increase by 0.47 yuan, which is very flexible; short-term environmental protection and high temperature influence, the limited price of oxalic acid supply still has a lot of room to rise, it is optimistic that the oxalic acid business is purely small market value target in the early stage of price rise. The investment rating of "highly recommended-A" is given for the first time.
The company is one of the leading enterprises in Asian oxalic acid industry. The leading products are industrial oxalic acid and refined oxalic acid, with a total production capacity of 95000 tons / year, of which industrial oxalic acid production capacity is 85000 tons / year, refined oxalic acid production capacity is 10 million tons / year, and oxalic acid products account for 20% of China's market share.
The oxalic acid production capacity in China accounts for more than 85% of the global oxalic acid production, and the industry concentration is very high. At present, oxalic acid is rarely produced in developed countries, and the whole oxalic acid manufacturing industry has been transferred to developing countries and regions. In 2016, China's production capacity was about 470000 tons, accounting for more than 85% of the global production capacity. The top five domestic production enterprises accounted for more than 85% of the market share. Large enterprises have obvious advantages in production and sales by virtue of scale production and brand awareness. There will be no new large enterprise entrants in the short term.
"Environmental protection" + "high temperature" affects the load of manufacturers, downstream is not sensitive to prices, oxalic acid prices are expected to continue to rise. In 2017, there was a lot of news about environmental protection, and the central environmental supervision work was launched in an all-round way. for the oxalic acid industry, the mainstream process uses carbohydrate oxidation, which contains a large amount of nitrogen oxides in the waste gas, and the tail gas treatment process requires high requirements. Therefore, if the wastewater and waste gas environmental protection measures are not in place, it is easy to be affected by environmental protection verification. At present, the form of environmental protection in Shandong is grim, major manufacturers in the south are under high temperature and load reduction, supply is tight, rare earths downstream ensure the stability of raw materials, and are not sensitive to prices. The price of oxalic acid has risen from 3500 yuan / ton at the beginning of the month to 5800 yuan / ton. The all-time high is 8000 yuan / ton, and the price is expected to continue to rise sharply in the future.
Coverage for the first time, giving a "highly recommended-A" investment rating. It is estimated that the company's EPS in 17-19 is 0.62,0.64 and 0.66 yuan respectively, corresponding to PE is 51,49 and 47 times respectively. The current market capitalization of the company is only 3.08 billion yuan. For every 1000 yuan / ton (before tax) increase in industrial oxalic acid prices, the company's earnings per share will increase by 0.47 yuan.
Risk hint: the increase of oxalic acid price is lower than expected; the construction progress of new project is lower than expected risk.