The company is a leading enterprise of domestic color masterbatch and cyanuric chloride. Guangdong Meilian New Materials Co., Ltd. is the first listed company with color masterbatch as its main product among domestic enterprises in China. Wachovia New Materials was founded in June 2000, now the annual production capacity of color masterbatch is more than 40,000 tons, and has an international advanced high intelligent automatic plastic color masterbatch production line. Meilian New Materials has two wholly owned subsidiaries and two holding subsidiaries: Shantou Guangyou Meilian New Materials Research Institute Co., Ltd., Guangdong Meilian diaphragm Co., Ltd., Yingchuang Sanzheng (Yingkou) Fine Chemical Co., Ltd., and Lianpu Technology (Shanghai) Co., Ltd., among them, Yingchuang Sanzheng is the world's largest cyanuric chloride manufacturer (March 27, 2019), with a production capacity of 90,000 tons. The layout of the company's industrial chain is perfect. At present, there is a business relationship between the two major business plates, and there will be synergy in the future.
The company's development strategy is clear and the dual business model is open. We find that the company's strategy mainly has two main lines: 1, to increase the production capacity of major products, to expand the market share in market segments; 2, to extend the industrial chain and make a complete layout of the industrial chain to improve anti-risk ability and their own comprehensive competitiveness. At present, the company is an industry leader in its two major business modules, and its different management personnel will play a technical role in their respective fields to promote performance growth.
The downstream demand of cyanuric chloride is good, the company has a prominent position in the industry, and will continue to make efforts in the future. At present, there is an endless stream of new products developed with cyanuric chloride as raw materials at home and abroad every year, of which about 60% of cyanuric chloride is used in the production of triazine pesticides. About 40% of cyanuric chloride is used in raw products such as reactive dyes, fluorescent brighteners, auxiliaries and pharmaceutical intermediates, with an average annual growth rate of about 3% and 5%. In 2017, the total annual consumption of cyanuric chloride around the world is about 210000 tons. At present, the main global production enterprises of cyanuric chloride are concentrated in China, Germany, the United States, Switzerland and other four countries. The market share of cyanuric chloride in Sanzheng has reached more than 2/3, and the industry has a prominent position. In addition, the company announced on April 25, 2019 that it would increase its capital to operate new technology with its own capital of 76.5 million yuan, acquire 51% of its equity and become its controlling shareholder, which will become the focus of the company's intermediary business in the future.
Profit forecast and rating. The company's EPS is expected to be 0.92,1.21,1.49 yuan respectively from 2019 to 2021, and the compound growth rate of net profit from 2019 to 2021 is 78%. Due to the sharp fluctuations in the market, the company is conservatively valued at 27 times in 2019, corresponding to the target price of 24.84 yuan, maintaining the "buy" rating.
Risk tips: the risk of safety and environmental protection, the risk of new project completion and production schedule or failure to meet expectations, the risk of raw material price fluctuations, the risk of weak downstream demand.