Event: recently, the "focus interview" exposed the pollution problem of yellow phosphorus factories in the upper reaches of the Yangtze River, some yellow phosphorus enterprises shut down, and the spot price of yellow phosphorus, the company's main raw material, rose sharply.
Comments:
Yellow phosphorus is limited by environmental protection, and its price is rising rapidly.
Recently, CCTV's "focus interview" exposed the pollution problem of yellow phosphorus factories in the upper reaches of the Yangtze River. Some yellow phosphorus enterprises shut down, and the spot price of yellow phosphorus has risen sharply from 15500 yuan / ton (July 9) to 23500 yuan / ton (July 16), an increase of more than 50%. The main producing areas of yellow phosphorus are mainly concentrated in Yunnan, Sichuan, Guizhou and Hubei provinces. Considering the implementation of the Yangtze River protection strategy, the second round of central environmental protection inspectors has been launched in an all-round way. It is expected that environmental protection efforts will continue to increase, and the price of yellow phosphorus may continue to rise.
Yellow phosphorus accounts for 50% of the product cost of water treatment agent, 60% of it.
The main raw materials of clear water treatment chemicals are phosphorus trichloride, glacial acetic acid, liquid chlorine, etc., while the main raw materials of phosphorus trichloride are yellow phosphorus, which accounts for about 50% and 60% of the total operating cost of water treatment agents.
The advantage of the integration of the industrial chain is highlighted, and the industry concentration is expected to accelerate.
The company is one of the few enterprises in the water treatment agent industry that can directly produce intermediate phosphorus trichloride, and has accumulated a stable and wide range of yellow phosphorus suppliers for many years, which can ensure the stable supply of yellow phosphorus. Considering the weak industrial chain layout of the competitors in the industry (the intermediate product phosphorus trichloride needs to be purchased), the advantage of the integration of the company's industrial chain is highlighted, and the industry concentration is expected to accelerate.
Compared with the previous round of yellow phosphorus and water treatment agents, the price increase of this round of products may exceed expectations.
Due to the rising cost of raw materials caused by the production restriction of yellow phosphorus in the upper reaches, the price of the company's water treatment pharmaceutical products will also rise.
The last round of yellow phosphorus prices soared: from 2007 to 2008, due to insufficient power supply and stringent energy conservation and emission reduction inspectors, the price of yellow phosphorus rose as high as 24000 yuan / ton, and the price of water treatment chemicals rose to more than 10000 yuan / ton.
The last round of water treatment agent prices soared: from 2017 to 2018, the water treatment agent industry experienced a concentration increase due to environmental protection, and the price of water treatment agent products increased significantly. In 2018, the average price of organophosphorus products reached 7500 yuan / ton.
At the beginning of 2019, the price of the company's water treatment agent products is about 6000 yuan / ton. considering that the industry concentration is higher than that in 2008, and the production limit of yellow phosphorus in the upper reaches is persistent or higher than expected, we think that the price increase of this round of water treatment agent may be higher than expected.
The gross profit margin of the product is expected to increase, and the performance is expected to rebound in the third quarter.
The price of 2019Q1's pharmaceutical products is down 4% from 18 years, resulting in a slight drop in gross profit margin, which is expected to bottom out in the third quarter as the price of pharmaceutical products caused by yellow phosphorus production restrictions rises. At present, water treatment chemicals account for 45% of the company's revenue structure, and the rest are environmental protection engineering business. at present, manual engineering orders are sufficient, and the second half of the year has entered the project order revenue confirmation period, and the overall performance growth rate is expected to rebound in the third quarter.
Profit Forecast and Investment rating
According to the forecast of the price level of 19Q1 water treatment agent products, the company is expected to achieve a net profit of 303 million and 409 million from 2019 to 2020, corresponding to 9 times and 7 times of the current stock price PE, respectively. If we consider the dilution and dilution of convertible bonds in the future, the corresponding PE from 2019 to 2020 is 11 times and 8 times respectively.
Taking into account the yellow phosphorus production restrictions brought about by the rise in product prices, the company's performance may exceed expectations, given a "highly recommended" rating.
Risk hint
The production restriction of yellow phosphorus is lower than expected, the price increase of water treatment agent products is lower than expected, and the progress of environmental protection project is lower than expected.