Results in the first three quarters of 2018 are in line with expectations

Jiangsu Cathay Pacific announced its results for the first three quarters of 2018: operating income was 29.476 billion yuan, up 15.1% over the same period last year; net profit attributed to the parent company was 736 million yuan, up 23.2% from the same period last year, corresponding to 0.47 yuan per share. Net profit attributable to the parent company was 532 million yuan after deduction, down 4.2% from the same period last year. The company's performance is in line with expectations.

Trend of development

The shortage of solvents and the peak demand season are conducive to the improvement of the company's electrolyte business. Since August, factors such as the suspension of production of environmental protection and maintenance by leading companies have led to a tight supply of electrolyte solvents in the market and a rise in prices, pushing up electrolyte prices by 10% to 15%. The mainstream price of electrolyte is now quoted at 3.6-49,000 yuan per ton. We expect that the increase in solvent prices and the peak demand season in the second half of the year will still support the rebound in electrolyte prices, which will be conducive to the improvement of the company's electrolyte business.

We will continue to promote the business of new chemical materials and new energy. The company steadily promotes the 40,000 tons / year electrolyte project in Ningde and the 40,000 tons / year electrolyte project in Poland. Ruitai New Energy, a wholly-owned subsidiary, continues to give full play to the development platform of chemical new materials and new energy business to integrate internal resources. Its holding subsidiary Chaowei New Materials actively develops electronic chemicals business.

Export business growth and investment income increase profit in 2018. The company actively promotes the textile and clothing supply chain service business. In addition, due to the holding Sun Company Cathay Pacific Investment listing transfer of 19.889% stake in Longshi Group, 1~3Q18 's investment income increased by 476% to 667 million yuan compared with the same period last year. The company predicted that thanks to the growth of export business and the increase in investment income, the net profit attributed to the parent company in 2018 was 852 million 1.084 billion yuan, an increase of 10% and 40% over the same period last year.

Profit forecast

We maintain the 2018e earnings per share forecast of 0.61 yuan unchanged, optimistic about the development of chemical new energy and supply chain services business next year, and raise the 2019e earnings per share forecast from 0.41 yuan to 0.45 yuan. Of this total, the estimated net profit attributable to 2018e/2019e is 9.57 / 714 million yuan, with a year-on-year change of + 24% CPM 25%; the estimated net profit attributable to 2018e/2019e after deduction is RMB 624 million, with a year-on-year change of-11% Universe 11%.

Valuation and suggestion

The current share price of the company corresponds to 8 times 11 times 2018 pm E and 13 times 2018 PM E after deducting the non-price. Maintain the "recommended" rating and target price of 8 yuan, corresponding to 13 picks 18 times 2018 Universe E, and after deducting non-18 times 2018 Universe E, there is 58% room for the current share price.

Risk

The price of electrolyte fell sharply, the sales volume of electrolyte was weak, and the capacity expansion was not as expected.