This report is read as follows:
The state has vigorously supported the fuel ethanol industry, the company's production capacity has increased significantly, and profits are expected to increase significantly.
Main points of investment:
For the first time, it was given a rating of "cautiously increasing its holdings", with a target price of 7.33 yuan. The net profit of the company from 2019 to 2021 was 539 million yuan, 700 million yuan and 941 million yuan respectively, and the EPS was 0.29,0.38,0.51 yuan respectively, representing a growth rate of 12%, 30% and 34%, corresponding to PE in 24-18-14. According to the PEG valuation method, we estimate the market capitalization of the company at 13.6 billion yuan, corresponding to the target price of 7.33 yuan, which is 6% away from the current stock price.
The company's fuel ethanol production capacity will increase significantly over the next three years. In 2018, the company completed a major asset restructuring, with an existing fuel ethanol production capacity of 1.35 million tons and a new construction of 1.55 million tons in the next three years, including 1.5 million tons of corn fuel ethanol and 50,000 tons of cellulose fuel ethanol, which is expected to be fully put into production by the end of 2021. After completion, the company will stabilize the company's leading position, according to 2018 per ton gross profit of 1400 yuan, will increase gross profit by 2.15 billion yuan.
The fuel ethanol industry is strongly supported by the state. Since 2002, the state has vigorously supported fuel ethanol, which is of great significance in saving domestic resources and reducing external dependence, and issued a number of policies.
If the vehicle fuel ethanol gasoline is covered nationwide by 2020, the demand for fuel ethanol will be about 14.4 million tons, and the future new construction and expected construction capacity will be 5.2 million tons. Even if the new production capacity is put into production, the shortfall will be more than 5 million tons.
The influence of trade friction changes the pattern. The United States is the largest source of fuel ethanol imports from China. At present, China's tariff on modified ethanol from the United States has been raised to 70 percent from 30 percent at the beginning of the year, and domestic imports to the United States remain low. The implementation of the new tax rate makes the import of US fuel ethanol lose its cost advantage, we judge that the future supply will be mainly provided by the domestic market, as the leader of fuel ethanol, the company is expected to achieve a simultaneous increase in volume and price.
Risk tips: fuel ethanol production is not as expected; crude oil prices have fallen sharply; corn prices have risen sharply; and the impact of trade frictions.
