Key Views
The company is mainly engaged in R&D, production and sales of polyurethane foam stabilizer products. At the same time, it also provides customers with professional and personalized technical services and support. From January to September 2017, the company achieved operating income of 237 million yuan, an increase of 6.39% over the previous year, and net profit attributable to shareholders of the parent company was 42.16 million yuan, a decrease of 25.50% over the previous year.
The downstream foam stabilizer industry is stable, and high barriers determine the industry pattern
The company's main products are hard foam stabilizer and soft foam stabilizer. The downstream products are in traditional industry fields such as refrigeration and insulation, furniture, automobiles, and building energy efficiency. At the same time, applications to other emerging fields, such as the military field, have also begun to be gradually explored. Since the foam stabilizer industry is a technology-intensive industry, the individual characteristics of products are remarkable, and customers have high requirements for supplier technology development and ability to provide solutions. As a result, high industry barriers make the number of competitors in the industry small, and the share of foreign giants is relatively high. With the continuous improvement of the company's technical level, there is considerable room for import substitution.
The hard foam stabilizer industry is leading the way, consolidating its advantages and seizing share
The company's hard foam stabilizer series products have broken the monopoly of multinational enterprises in the domestic market, and have become mainstream products in the hard foam stabilizer market with outstanding cost performance and high-quality technical service advantages. According to the company's domestic sales estimates in 2016, the share of the company's hard foam stabilizer products in this market segment reached 17.27% in 2016, leading the industry.
Furthermore, as the bottleneck in production capacity is broken, it is expected that overseas markets will continue to be developed in the future while safeguarding the domestic market share.
Soft foam stabilizers have entered a period of rise. Technology improvement accelerates market development. The company's soft foam stabilizer production is relatively low, and due to technical level restrictions, the market share of foreign manufacturers is high. However, with the company's technological breakthroughs and product upgrades, the market share of the company's soft foam stabilizer products gradually increased. By the end of 2016, the sales volume of the company's soft foam stabilizer series products reached 2067.14 tons, an increase of 14.71% over the previous year. In the future, as the company further develops the soft foam stabilizer market, the market share of this product will be further increased.
Investment advice
We expect the company to achieve operating income of 323, 377 and 435 million yuan in 2017-2019, up 14.27%, 17.00% and 15.25% year on year. Net profit attributable to shareholders of the parent company was 62.12 million, 8.136 million and 103 million yuan, up -8.99%, 30.96% and 26.04% year-on-year, with EPS of 0.62, 0.81 and 103 yuan per share. Corresponding PE is 35.0, 26.7, and 21.2 times.
Covered for the first time, a “prudent increase in holdings” rating will be given over the next six months.
Risk warning
The growth rate of the downstream real estate industry has slowed; core technology has been compromised and core technical personnel have been lost; Germany's Evonik's acquisition of the air chemical materials division has led to the loss of core customers; and competition has intensified due to the sinking market of multinational companies.