Viscose filament and spandex double bibcock, Henan Provincial Department of Finance increased nearly once again. The company is the double leader of viscose filament and spandex, and has competitive advantages in production capacity, technology and cost. After 2014, due to the release of spandex production capacity, the company's revenue grew steadily and gross profit periodically weakened significantly. The recent marginal change in the equity level of the company is that the Central Plains asset management continues to increase and close to raising the license plate. Central Plains Capital Management, controlled by the Department of Finance of Henan Province, is the first AMC company in Henan Province, with strong strength, and Xinxiang Chemical Fiber is the most important shareholding platform for Central Plains Capital Management. After the general election of the board of directors, Central Plains Capital Management is expected to give further play to its resource advantages.
Viscose filament: supply and demand balance, stable profit. The viscose filament industry completed the reshuffle from 2015 to 2018. At present, five oligopolies have been formed, with supply and demand entering a balanced period (annual output of 200000 tons, domestic demand of 120000 tons and exports of 80,000 tons). Viscose filament inventory is low this year, oligopoly price protection ability is strong, the price did not decline with the raw material dissolved pulp price decline, profit improvement is obvious. We believe that viscose filament will remain stable and profitable.
Spandex: the industry is expected to pick up after the new capacity is digested. Spandex CR5 has reached 64%, but the production technology of small enterprises is backward, and the room for industry integration is still large. At present, the main factor suppressing spandex profits is the release of new capacity in Chongqing Huafeng. Spandex will continue to hit bottom in the short term, but capacity growth will be less than 5% in the next two years. We believe that spandex is expected to hit bottom and pick up after the new capacity is gradually digested.
The main capital expenditure of the company in the future is the 20, 000-ton viscose filament project with an investment of 1.5 billion, of which 10, 000 tons is expected to be put into production in the second half of 2020. In addition, the company's layout on green fiber is worth looking forward to, including 60,000 tons of Lessel fiber project (subsidiary) and new solvent filament project. With the help of the technical cooperation with China Textile Institute and its own viscose technology accumulation, the company is expected to become a leading green fiber manufacturer in China.
We forecast the company's annual return net profit of 1.52, 223, 380 million and EPS0.12/0.18/0.30 yuan in 2019-20-21, corresponding to the current price of PE, 35.3 and 23.9, 14.1 times. The company is a double leader of viscose filament and spandex, with strong competitiveness in production cost and technical level, considering that the output of viscose filament and spandex is growing rapidly in the next two years, and the Central Plains capital management is expected to bring a broader development space for the company, referring to the comparable company, giving the company 28 times PE in 2020, with a target price of 5.0yuan. Coverage for the first time, giving a "overweight" rating.
Risk hint: the price of viscose filament and spandex is declining, and the progress of new production capacity release is not as expected.