The rise in the quantity and price of caustic soda contributed to the substantial growth of the company's performance. Results of Liwen Chemical in the first half of 2017: revenue increased by 54.6% to HK $1.253 billion, gross profit increased by 79.7% to HK $533 million, gross profit increased by 6 percentage points to 42.6%, and net profit increased by 102.5% to HK $242 million. The company's earnings per share were HK29.3 cents (HK14.5 cents for the same period last year) and the Board recommended an interim dividend of HK10.0 cents per share (compared with HK5.0 cents for the same period last year). The substantial increase in operating performance in this period is mainly due to the high magnificent demeanor of the caustic soda industry and the commissioning of the company's new plant, and the increase in the volume and price of caustic soda products.
With strong support at both ends of supply and demand, the caustic soda industry has made a big turnaround. On the one hand, limited by the cliff decline of 93.8% of the liquid chlorine price of symbiotic products and the gradual increase of environmental protection pressure, the caustic soda industry did not expand production on a large scale and maintained a stable production capacity in the case of rising prices; on the other hand, the production capacity and operating rate of downstream alumina industry are both higher, and the demand for caustic soda raw materials is strong. Both ends of supply and demand play a strong supporting role for the great turnaround of the caustic soda industry.
The third phase of the plant will expand its capacity and invest in research and development to add vitality. The company will build the third phase of the project in Jiangxi plant in the second half of the year to increase product sales and is expected to further improve the company's performance. In addition, the company is committed to the research and development of new products, hire experienced scientific research experts at home and abroad, and add scientific research equipment to enhance the strength of the internal R & D team. The company expects to successfully develop new products and special coatings this year to match the future development of fine chemicals, innovative products are expected to become a new growth point of the company's performance.
Our point of view: we believe that there are several bright spots in the development of the company: 1, the high demeanor of the caustic soda industry is expected to be maintained, and the performance of the company is expected to maintain high growth; 2, after the completion of the construction of the third phase of the company's Jiangxi plant, product sales will further increase, performance will increase significantly; 3, the company's new products are expected to become a new growth point after successful research and development and put into production. We initially forecast that the current stock price will be about 8 times the PE of the company's 2017 results, and investors are advised to pay active attention.
Risk hint: the new production capacity of caustic soda is higher than expected, and the product price is adjusted back.