Investment points:
A leading enterprise of environmentally friendly modified material products. Kunitachi Technology is a leading domestic enterprise of environmentally friendly modified material products, and an internationally renowned enterprise designated as a material supplier. The main products include EVA environmentally friendly modified materials and products, TPR environmentally modified materials and products, and modified recycled engineering plastics. The products are widely used in high-end sports and leisure footwear materials, sports equipment, electronic supporting products, household appliances, automobile auto parts, etc.
The scale of the industry continues to grow, and downstream applications are broad. The company's main products are in the field of synthetic polymer materials, which are essential materials for the construction of the national economy and people's daily lives. In recent years, the consumption of modified plastics has grown by about 12-18%, and the development rate is significantly higher than the GDP growth rate; domestic EVA has grown rapidly, and the import growth rate is lower than that of domestic production. According to WIND and Zhuochuang information data, in 2016, domestic EVA imports were 1.04 million tons, up 9.97% year on year, and domestic EVA output was 560,000 tons, up 32.23% year on year; downstream footwear products, electronic products, home appliances, and automobiles The scale of the industry is growing steadily, and the prospects for modified materials are promising.
It is the leader in modified material products, and product strategy adjustments help improve performance. In 2013-2017, the revenue of EVA environmentally modified materials and products increased from 76.15 million yuan to 43.63 million yuan. The compound growth rate was 55%, and the revenue share increased from 24% to 58%. The revenue of TPR environmentally modified materials and products fell from 205.4 million yuan to 87.88 million yuan. The compound growth rate was -19.12%, and the revenue share fell from 64% to 12%.
In 2014-2017, revenue from the modified recycled engineering plastics business increased from 54.01 million yuan to 16.18 million yuan. The compound growth rate was 45%, and the revenue share increased from 14% to 22%. Currently, the company's main profit comes from EVA environmentally modified materials and products. In 2017, the company's gross profit of EVA environmentally modified materials and products was 115.9972 million yuan, an increase of 19% over the previous year, accounting for 69.3% of gross profit.
Raise investment to expand production capacity and improve product systems. The company raised a net capital of 278 million yuan. The actual capital raised is intended to be used for the “EVA Environmental Modified Materials and Products Technology Transformation Project”, the “R&D Center Technology Transformation Project”, and supplementary working capital. The plan is to increase the production capacity of 12,000 tons of EVA environmentally friendly modified materials and 12,000 tons of EVA environmentally modified material products. The fund-raising project is expected to be put into operation on April 30, 2019, which will help the company break through production capacity bottlenecks and improve the product development system.
Profit forecasts and investment recommendations. We predict that the company's net profit for 2018-2020 will be 87 million yuan, 120 million yuan, and 145 million yuan, respectively, and the diluted EPS will be 0.54 yuan, 0.75 yuan, and 0.91 yuan respectively. The company will be given 38 times PE in 2018, with a target price of 20.52 yuan, and a “increase in holdings” rating.
Risk warning. Product sales fell short of expectations, raw material prices were at risk of fluctuating, and the progress of fund-raising projects fell short of expectations.