Event

2018 Annual report: the company released its 2018 annual report on the evening of March 19, with revenue of 526 million yuan in 2018, an increase of 20.51% over the same period last year, a net profit of 137 million yuan, an increase of 110.83%, a deduction of 128 million yuan, an increase of 111.54%, and a net cash flow of 163 million yuan, an increase of 96.87% over the same period last year. The weighted average ROE was 21.80%, up 7.63% from the same period last year.

Dividend: the company plans to pay 3.00 yuan for every 10 shares and use the capital accumulation fund to increase the share capital by 9 shares for every 10 shares.

2019Q1 performance forecast: the company expects 2019Q1 performance of 3000-36 million yuan, an increase of 12.36% over the same period last year. 34.83%.

2019 financial budget: the company expects revenue of 650 million yuan and net profit of 150 million yuan in 2019.

Brief comment

The performance increased sharply compared with the same period last year, and the dividend was handed back to shareholders.

The significant increase in the company's performance over the same period last year was mainly due to the increase in the price of ① products, the release of pharmaceutical intermediates of ② mercapto compounds, the increase in exchange earnings and the decrease in interest expenses brought about by the appreciation of the ③ dollar, and the significant decrease in financial expenses compared with the same period last year. The company's Q4 performance in a single quarter was 30 million yuan, down 25% from the previous month, and an increase of 74% over the same period of 2017Q4. Q4 month-on-month decline, we think is mainly due to: ① Q4 quarter RMB against the US dollar did not continue to depreciate significantly, the company Q4 financial expenses increased compared with Q3; ② product prices declined slightly. The company's cash dividend is about 37 million yuan, and the cash dividend ratio is about 27%. The transfer ratio of 10 to 9 is at a relatively high level, which is only one step away from high delivery.

The sharp increase in the company's ROE during the reporting period was mainly due to the increase in net profit margin caused by the increase in gross profit margin. Gross profit margin and net profit margin increased by 12 and 11 percentage points respectively compared with the same period last year, while the difference between gross profit margin and net profit margin remained basically unchanged; asset turnover and liabilities also remained unchanged.

In terms of cash flow, the company's current-to-net ratio and present-income ratio are 118%, and the cash flow condition is excellent. At the end of the reporting period, the company's inventory balance was 114 million yuan, an increase of 43% over the same period last year, and the turnover days also increased from 88 days to 119 days; the final accounts receivable was 25 million yuan, down 43% from the same period last year, and the turnover days decreased from 33 days to 24 days.

2019Q1's performance continued to grow compared with the same period last year, mainly due to the fluctuation of upstream raw material prices when the prices of ① products were stable, and the volume of ② pharmaceutical intermediates one after another.

Photoinitiator subdivides the leader, the advantage of the whole industry chain is remarkable.

The company is mainly engaged in the R & D, production and sales of photoinitiators and sulfhydryl compounds and their derivatives. The main products of photoinitiators include 907,369,184,184, ITX, BMS, etc., with a production capacity of nearly 2000 tons, occupying more than 50% of the global market share for a long time. The company also has a production capacity of 2000 tons of sulfhydryl compounds, some of which are used as photoinitiator intermediates for self-use and some are sold in vitro. Company 907, ITX, BMS and other products equipped with upstream sulfhydryl compound intermediates, with the advantage of the whole industry chain.

The development of light-curing ink is just at the right time, and the market space is broad.

Light-cured inks are rapidly replacing traditional solvent-based inks because of their wide adaptability, higher quality, no VOCs emissions and low cost. According to the China Industry Information Network, the market growth rate of UV inks in China was more than 10% from 2012 to 2015, but UV inks accounted for only 7% of all inks. Since 2016, with the tightening of environmental protection, UV ink will accelerate to replace the traditional solvent ink.

Inner Mongolia adds 29000 tons of production capacity, laying a foundation for high growth in the future

In February 2019, the company announced that it would postpone the production of the investment project to April 2020, after the company announced that it would change the original "construction project of 5000t/a photoinitiator series" to "29000t/a photoinitiator and pharmaceutical intermediate project", including 11000 tons of terminal photoinitiator and supporting upstream intermediates, as well as 3000-4000 tons of pharmaceutical intermediates. The company's new gloss initiator production capacity is several times the existing capacity, and self-equipped with upstream intermediates, continuing the advantage of the whole industry chain integration. The total investment of the project is 1 billion yuan, the first phase investment is not more than 500 million yuan, the revenue is expected to be 950 million yuan, and the net profit is 270 million yuan. The gradual commissioning of the Inner Mongolia project will establish the company's high growth in the future.

It is estimated that the company's net profit from 2019 to 2020 will be 1.5 yuan and 230 million yuan respectively, corresponding to 28 and 18 times of PE.