Item:
The company released its quarterly report for 2018: operating income 374 million yuan, year-on-year + 64.51%; return net profit 34.9831 million yuan, year-on-year + 86.93%; deduction of non-return net profit 33.1227 million yuan, an increase of 129.31% over the same period last year.
Main viewpoints
1. The rise in the price of raw materials has impacted marginal improvement, and the company's performance has been steadily upward.
The company's main foundry materials, the main products include self-hardening furan resin, cold box resin and other resin adhesives, as well as curing agents, paints, risers, filters and other supporting casting materials, which are in the lower reaches of the basic chemical industry chain. The sharp increase in the price of basic chemicals since 2017 has greatly increased the company's raw material prices. The company's main product raw materials include MDI, furfuryl alcohol, urea, phenol and so on. The largest increases in 2017 were 110%, 130%, 25% and 55%, respectively, and product profits were greatly affected (gross profit margin: 28.43% in 2017). Volume premium (sales volume: 100000 tons in 2017, + 14.99%) and effective cost control (three fees: 10.56% in 2017) ensure a steady increase in the company's performance.
In 2017, H1 as the downstream of the company was mainly large enterprises or foundry plants of state-owned enterprises in the fields of automobiles, machine tools, internal combustion engines, etc., the long price approval process led to a time lag in the price transmission driven by the increase in raw material prices, and the gradual increase in product prices of H2 Company in 2017 alleviated the pressure of accelerated profit erosion.
Q1 in 2018 and after that, the prices of raw materials such as MDI, urea and furfural have fallen to a certain extent, and will gradually be reflected in the improvement of the company's profit margin.
2. IPO investment project: gradually put into production in the second half of 2017, capacity bottleneck removed
The production capacity of the company's IPO pre-plant (38,000 tons / year self-hardening furan resin + 20,000 tons / year cold box resin + 18000 tons / year sulfonic acid curing agent + 21,000 tons / year paint, with a total production capacity of 910,000 tons / year) has been running at high load, and the capacity bottleneck is serious. The fundraising projects include 40,000 tons / year self-hardening furan resin + 15,000 tons / year cold box resin + 20,000 tons / year sulfonic acid curing agent. After putting into production, the potential demand for products is gradually released, and with the steady progress of the business in the future, sales are expected to increase steadily.
3. Non-fund-raising projects: special phenolic resin and other new projects to promote follow-up performance growth
In addition to being used in the company's main foundry field, special phenolic resin is also widely used as refractories, abrasives, friction materials, electronic grade resin and so on. the company has invested about 100 million yuan to promote the construction of 40,000 tons of special phenolic resin project. and the civil construction has started in March 2018, and is expected to be completed by the end of 2018, the product profit is similar to the main industry, and promote the company's performance growth in 2019.
4. Industrial chain integration + new material extension mergers and acquisitions, layout growth in the future
In February 2018, the company announced that it planned to buy 2.9% of Jiangsu Ronghui Lithium Industry (the main business, lithium carbonate, etc., with H1 revenue of 377 million yuan in 2017 and net profit of 9200 yuan) for 107 million yuan, starting the attempt of extension layout. According to the quarterly report, the acquisition has been completed. In the future, the integration of the industrial chain (raw material furfural-furfuryl alcohol, with downstream customer layout of downstream products), other electronics, new energy and other new materials epitaxial mergers and acquisitions are expected to actively promote.
5. Investment advice:
We expect the company's 2018-2019 performance of 150,200 million yuan, EPS 0.77,1.00 yuan, corresponding to PE 19 times, 14 times, the company's style is solid, the main foundry resin binder and other casting auxiliary materials grow steadily, special phenolic resin and other new business development, integrated layout of industry chain, extension mergers and acquisitions direction development thinking is clear, maintain the "recommended" rating. Investors are advised to pay more attention.
6. Risk Tips:
Raw material prices remain high, the release of new capacity and the construction of new projects are not as expected.