Event: Baiao Chemical released its three-quarter report in 2019, with revenue of 602 million yuan (year-on-year + 49.33%) and net profit of 234 million yuan (+ 115.66%) in the first three quarters, of which Q3 achieved revenue of 252 million yuan (year-on-year + 66.90%, month-on-month + 18.28%) and net profit of 122 million yuan (year-on-year + 167.31%, month-on-month + 50.84%).
Comments: Baiao Q3 performance compared with the month-on-month growth, and then exceed expectations, our analysis of the main departments:
(1) after the fund-raising projects CIT/MIT and BIT were put into production in April 1919, the new production capacity was digested by the market, and the output of fungicides increased significantly compared with the same period last year; according to the announcement, the sales of industrial fungicides of 19Q1~Q3 Company were 5438, 8051 and 8503 tons respectively (Q3 ring ratio + 5.6%).
(2) the production of F-nitrile intermediates in the fund-raising project was expanded in July 19, and the production and sales volume of Q3 increased significantly; according to the announcement, the production of F-nitrile of 19Q1~Q3 Company was 244,200 and 506 tons respectively (Q3 ring ratio + 153%).
(3) affected by the water accident, the prices of some of the company's products and intermediates continued to rise; according to the announcement, the average sales prices of 19Q1~Q3 's MIT series were 61.43,60.38,69.70 yuan / kg respectively, BIT series were 76.47,140.03 and 165.48 yuan / kg respectively, and F-nitrile series were 31.04,80.85,87.32 yuan / kg respectively. Shenyang Baiao, a subsidiary of the main F-nitrile series, has correspondingly achieved a turnaround from losses to profits.
Fund-raising projects continue to reach production to promote the continued growth of sales, the industry supply gap to maintain the price boom.
According to the announcement, its fundraising project 12000 tons of CIT/MIT, 2500 tons of BIT and other products were officially put into production in April 2019, making the total production capacity of isothiazolinone up to 30,000 tons, effectively alleviating the problem of insufficient production capacity, increasing scale effects and reducing unit costs, and making up for the shortcomings of BIT production capacity and enriching the product structure. The first phase of the project with an annual output of 10000 tons of F-nitrile intermediates was put into production in September 2017, and the second phase was expanded in July 2019. Since then, the problems of insufficient production capacity and high unit cost of the intermediates have been solved. It also provides sufficient and stable supply of raw materials for other projects in the company's F-nitrile intermediate industry chain, and can achieve external sales in addition to meeting the company's own use.
At present, the resumption time of the company's F nitrile production peer Q4 is not clear, the short-term supply of BIT and MIT is difficult to alleviate, and the price is expected to maintain the boom; the company's new investment projects continue to increase BIT and F nitrile Q4 sales are also expected to increase month-on-month, Q4 company performance is expected to continue to grow.
The demand for industrial fungicides is growing rapidly, the competition pattern is orderly, and the company has a lot of room for long-term growth.
According to the China Industrial Information Network, the demand for industrial fungicides is expected to maintain a growth rate of about 7% in the future, and isothiazolinone fungicides still have a lot of room for development in China. Due to cost and environmental protection and other factors, the international chemical giants have greatly reduced the production of isothiazolinone raw drugs, and at present, only Dow and Sol in the United Kingdom have retained part of the production capacity; most of the domestic small production capacity below 1000 tons has been withdrawn continuously because it can not meet the higher and higher environmental protection and technical requirements, the company has ushered in the historical development opportunity as the domestic crude drug leader. At present, the company's exports maintain rapid growth, relying on cost-effective advantages and certification barriers, long-term growth space.
Investment advice: maintain the buy-A rating with a six-month target price of 43 yuan; the estimated net profit from 2019 to 2021 is 4.0,4.6 and 510 million yuan respectively, corresponding to 10.7,9.4 and 8.4 times of PE.
Risk hints: downstream demand is reduced under the influence of environmental safety supervision, competitors resume production more than expected, Bamp F nitrile conversion production exceeds expectations, and C/MIT conversion exceeds expectations.