The company releases Q1 Quarterly report 2018

The company released its quarterly report for 2018, with revenue of 373 million yuan, an increase of 48.85% over the same period last year, and a net profit of 20 million yuan, an increase of 109.43% over the same period last year. The three fees totaled 25 million yuan, accounting for 6.59% of revenue, down from 7.81% last year, 1.22pct, of which sales expenses were 7.8411 million yuan, revenue accounted for 2.10%, management expenses were 16.596 million yuan, revenue accounted for 4.44%, financial expenses were 174200 yuan, and revenue accounted for 0.05%.

The quantity and price of epoxy resin rose simultaneously.

Operating data show that the company produced 21721.65 tons of epoxy resin in the first quarter, an increase of 23.2% over 17632.18 tons in the same period last year; the average sales price was 20689.34 yuan / ton, an increase of 37.26% over the same period last year. In terms of cost, the purchase price of bisphenol A was 11595.09 yuan / ton in the first quarter, up 23.66% from the same period last year; epichlorohydrin was 14231.06 yuan / ton, up 88.38% from the same period last year; and tetrabromobisphenol A was 26343.43 yuan / ton, up 13.37% from the same period last year.

The industry pattern is expected to improve, and the new capacity is about to contribute to the performance.

In 2016, the domestic production capacity of epoxy resin is 2.25 million tons, the output is 1.13 million tons, and the capacity utilization rate is about 50%. With the sustained high pressure of environmental protection policy, some small manufacturers choose to withdraw from the market, backward production capacity is eliminated, and the market supply and demand pattern is expected to continue to improve. The company already has a capacity of 73000 tons in Guangzhou, and the utilization rate of capacity is relatively high. The new capacity of 117000 tons in Zhuhai is expected to contribute to the performance in 2018.

The demand for electronic grade epoxy resin is expected to increase greatly.

After the United States announced the "ban on the sale of chips" to ZTE, China's chip industry is facing unprecedented challenges, but also ushered in a new round of development opportunities. At the same time, with the growth of automotive electronics and virtual reality industry, the development of PCB industry is expected to further enhance, driving the domestic demand for electronic grade epoxy resin. The company's production capacity of more than 50% is electronic grade epoxy resin, which is expected to fully benefit.

Investment advice:

We estimate that the 18-20 year net profit is 177 million yuan, 266 million yuan and 301 million yuan respectively, EPS is 0.29,0.43,0.49 yuan, PE is 17.93X, 11.96X and 10.56X, respectively.

Risk Tip: product prices have fallen sharply, and new capacity has not been put into operation as expected.