Event: on September 12, 2017, Zhuhai Hongchang obtained the "filing notice of pilot production (use) Plan of Hazardous Chemicals Construction Project" issued by Zhuhai production Safety Supervision Bureau, with a trial production period of one year. On September 27, 2017, Zhuhai Hongchang trial production was successfully produced for the first time.
Fund-raising project drive, open the growth space. Hongchang Electronics has an existing production capacity of 73000 tons. After raising 117000 tons of production capacity, the company will have a production capacity of 190000 tons. High-end products account for a relatively high proportion of fund-raising projects, which is expected to benefit from the sustainable development of the domestic copper clad laminate industry, achieve rapid volume, and significantly thicken the company's performance.
The company is an electronic grade epoxy resin leader. The company takes high-performance and environment-friendly epoxy resin as its main products. Because of its excellent insulation, corrosion resistance, chemical resistance, heat resistance and adhesion, it is widely used in insulation and packaging in electronic and electrical industries. It is also used in special anticorrosive coatings (mainly used in automotive, marine, container and food cans and other industries), composite materials and other fields. Among them, electronic grade epoxy resin accounts for more than half of the company's revenue, the main downstream is copper clad laminate, the main customers include Jin'an Guoji, Ultrasonic Electronics, Shanghai South Asia and so on.
The epoxy resin industry has serious overcapacity, but the capacity growth rate has slowed down. There are more than 100 epoxy resin production enterprises in China, with a production capacity of more than 2 million tons, while the domestic output is 1 million tons, with obvious overcapacity. Most companies in the industry only produce relatively low-end epoxy resin. since last year, many enterprises have been operating at a loss, and small production capacity has been withdrawn one after another. coupled with the stricter environmental protection, the overall supply and demand pattern of the industry has gradually improved.
Demand is driven by superimposed costs, and product prices rise rapidly in the second half of the year. The main raw materials of the company's products are bisphenol A, epichlorohydrin, tetrabromobisphenol An and acetone. The total procurement cost of these four main raw materials accounts for an average of about 85% of the operating cost, and the procurement cost of bisphenol An and epichlorohydrin accounts for an average of about 65% of the operating cost. The company's main downstream copper clad laminate industry is improving, and the performance of leading companies such as Jin'an Guoji and Shengyi Technology continues to grow. In the second half of this year, the price of epichlorohydrin rose rapidly from 7600 yuan / ton in July to 11000 yuan / ton in October, pushing up the price of epoxy resin from 16000 yuan / ton in July to 20500 yuan / ton in October, an increase of nearly 30%. The price difference widened from 5000 yuan / ton to about 7000 yuan / ton, and the company's performance is expected to reverse after a continuous decline.
Valuation and rating. It is predicted that the net profit of the company from 2017 to 2019 is 65 million yuan, 120 million yuan and 170 million yuan respectively, and the EPS is 0.11,0.20 and 0.28 yuan respectively, corresponding to 56 times, 30 times and 21 times of PE respectively.
Risk hint. Crude oil prices fluctuated sharply, and the production capacity of fund-raising projects fell short of expectations.