Event: the company issued a pre-increase announcement, which is expected to achieve a net profit of 95-1 billion yuan for shareholders of listed companies in 2017, compared with-328 million yuan in 2016, and a substantial turnround in 2017.
1. 2017 light pack, the performance has been greatly reversed.
The company is located in Shanghai Caojing Industrial Park, working closely with the park giants to build an integrated and mutually beneficial business model, with an annual production capacity of 720000 tons of caustic soda, 720000 tons of dichloroethane, 600000 tons of liquid chlorine, 80,000 tons of paste and special resin, all liquid chlorine and 30% caustic soda for MDI/TDI/PC and other devices downstream of the park, solving the general chlor-alkali enterprises to use alkali to supplement chlorine pain points. At the same time, in 2016, the company made a substantial provision for impairment and personnel diversion costs totaling 460 million yuan, and the problems left over by history were basically solved. In 2017, Q1-Q3, the company realized revenue of 1.533 billion yuan, 2.11 billion yuan and 1.77 billion yuan respectively, and net profit of 58 million yuan, 192 million yuan and 352 million yuan respectively; it is estimated that the net profit of 2017Q4 in a single quarter is 348-398 million yuan, totaling 950-10 million yuan, with a substantial reversal in performance.
two。 The price center of caustic soda increases, and chlor-alkali balance enterprises benefit most.
There has been little growth in caustic soda production capacity in China since 2013. with the elimination of backward production capacity, environmental protection and high pressure, the industry concentration has been increasing. In 2017, the average price of caustic soda was 3139 yuan / ton, + 63% compared with the same period last year, with a maximum of 4281 yuan / ton. In January 2018, due to the downstream entering the off-season, the current price is adjusted back to 3055 yuan / ton. As a by-product of caustic soda, liquid chlorine is sold at a discount in most areas due to the imbalance of chlor-alkali. The freight cost of liquid chlorine in Shandong tanker is 8-1100 yuan / ton. The company chlor-alkali balance, stronger competitiveness, caustic soda price increases every 100 yuan / ton, thickening company EPS 0.04 yuan.
3. Epitaxial development is the icing on the cake, thickening the company's profits
The company has a 40% stake in a joint venture with Inner Mongolia Jun under construction of 200000 tons of seed emulsion paste resin project. The first phase of 100000 tons of H1 is expected to be put into production in 2018. We expect to increase the investment income of the company by 30 million yuan. At the same time, the company holds a 30% stake in Shanghai Huntsman and 15% in Shanghai Lianheng, with an estimated investment income of 300-350 million yuan in 2017. The 240000-ton MDI project under construction in Shanghai Huntsman is expected to be put into production in 2018, and we expect to increase the company's investment income by more than 220 million yuan.
4. Valuation and rating
We expect the company's 2017-2019 net profit to be 980 million yuan, 1.069 billion yuan and 1.141 billion yuan respectively, corresponding to PE 14x, 13x and 12x, covering for the first time and giving "overweight" rating.
Risk hint: the price of the product fluctuates greatly, and the production progress of the project under construction is not as expected.