This report is read as follows:
The company is the leader of photoinitiator in the world, the increase in product price leads to the increase of gross profit margin, and the first phase of Inner Mongolia is about to be put into production, contributing to the increment of performance and maintaining the "overweight" rating.
Main points of investment:
Maintain and increase holdings. As the Inner Mongolia project was put into production slightly lower than expected, we lowered our profit forecast and estimated that the company's EPS in 2019-2021 will be 0.70 shock 0.95 shock 1.07 yuan (the original 0.85 pound 1.09 yuan in 2019-2020). Give 2019 25 times PE valuation, lower the target price to 17.50 yuan (originally 18.77 yuan), maintain the "overweight" rating.
The price of the product continues to rise and the performance is in line with expectations. 19H1 achieved an operating income of 279 million yuan, an increase of 10.66% over the same period last year, and a net profit of 69 million yuan, an increase of 3.6% over the same period last year. Due to the rise in raw material prices, the company's product prices continued to rise, of which the 19Q1 price of 907 increased by 5 yuan / kg compared with the 2018 average price, due to the company's advantage of the whole industry chain, resulting in less cost impact and a substantial increase in gross profit margin. The gross profit margin of 19H1 photoinitiator was 49.88%, 6.65% higher than that of the same period last year. Sulfhydryl compounds and their derivatives were affected to a certain extent by fluctuations in raw materials, and the gross profit margin decreased slightly by 2.95% to 42.10% compared with the same period last year.
Domestic photoinitiator leader benefits from the increase of industry concentration. At present, the company has more than 2000 tons / year light initiator and 2000 tons / year sulfhydryl compound production capacity, photoinitiator 907, ITX, BMS and other products have the advantage of the whole industry chain production, the company has occupied more than 50% of the global market share and more than 70% of the domestic market share for a long time. The industry benefits from the increasingly stringent environmental protection situation, the production of small and medium-sized capacity continues to be restricted, and the industry concentration continues to increase since 2011, and the company has benefited significantly as an industry leader.
The first phase of Inner Mongolia project is about to be put into production, contributing to the increment of performance. The company has invested more than 1 billion yuan (more than 500 million in the first phase) in Alashan, Inner Mongolia, for 29000 tons of photoinitiators and pharmaceutical intermediates, including 11000 tons of photoinitiators and 18000 tons of pharmaceutical intermediates and derivatives. The project will effectively expand capacity to solve capacity bottlenecks and broaden the product line. At present, the project is expected to carry out trial production in October 2019. At the same time, it is expected that the continuous expansion of the company's photoinitiator product line will support high performance growth in the next three years.
Risk factors: the risk that the production progress of new capacity is not as expected, and the risk of raw material prices rising sharply.