Incident: The company released its 2019 annual report. The company achieved operating income of 371,4952 million yuan, an increase of 11.54% over the same period last year; net profit attributable to shareholders of listed companies was 73.6517 million yuan, an increase of 9.56% over the same period last year. The profit distribution plan is to distribute a cash dividend of 2.5 yuan (tax included) for every 10 shares, using the Capital Provident Fund to transfer 5 shares to all shareholders for every 10 shares.
Key points of investment:
Leading domestic colorant company, colorant business is growing steadily
The company is a professional supplier of colorants and functional additives in China. The products are mainly used in many color application fields such as coatings, textile fibers, latex, ink, etc. After years of development, the company has firmly taken the leading position in domestic paint colorants. Judging from the company's historical operating situation, the colorant business as a whole has maintained steady growth. The compound growth rates of the company's colorant business sales and sales volume were 8.7% and 8.5% respectively in the past five years, and the growth rate was significantly higher than the industry average. By the end of 2019, the company had a total production capacity of 20,600 tons of various colorants. With the subsidiary Changshu Shiming 20,000 tons (of which 10,375 tons of water-based colorants were inspected and put into operation in 2017), the company's total colorant production capacity will reach 31,000 tons, and the capacity bottleneck problem can be effectively solved (capacity utilization rate in 2019 was 119.2%).
Actively carrying out strategic industrial transformation and accelerating the development of the pre-spinning coloring industry, considering the ceiling in application fields such as paint, ink, and latex in the existing business structure, there are obvious restrictions on the company's growth. In 2018, the company identified the pre-spinning coloring industry as a strategic core industry following the paint industry. Compared with traditional fiber dyeing processes, pre-spinning coloring eliminated subsequent dyeing processes, reduced the “three wastes” pollution and huge energy consumption generated by processes such as high-temperature dyeing, finishing and cleaning, which is conducive to promoting energy saving and emission reduction in the fiber production process, and has good development prospects.
In 2017, the production of colored fibers before spinning in China was about 5 million tons (corresponding demand for fiber color masterbatches is about 130,000 to 150,000 tons), and the growth rate of pre-spinning colored fiber composites from 2010 to 2017 was 14%, accounting for only 10% of the total amount of chemical fibers. Under stricter environmental protection, traditional printing and dyeing will inevitably be replaced by the fiber stock coloring process due to pollution and energy consumption issues, so judging from the growth space for fiber masterbatches, there is plenty of room for imagination. At present, the company has prepared and developed a variety of technologies and products for coloring colorants for wet spinning fiber undiluted solution, and have been verified and tested by some users. In order to further accelerate the development of pre-spinning coloring business, in November 2019, the company announced that it signed a strategic agreement with the China Textile Research Institute to sign a strategic cooperation framework agreement on polymerization spinning technology, special colorants, colorants and fiber masterbatches, functional masterbatches, etc. for polyester and polyamide stock solution coloring projects.
Profit Forecasts and Ratings
It is estimated that the company's EPS from 2020 to 2022 will be 0.76 yuan, 0.89 yuan, and 0.97 yuan respectively. Considering that the company's pre-spinning coloring business is in a period of rapid growth, there is broad scope to replace traditional dyeing processes, and for the first time, a “recommended” rating was given.
Risk warning
Prices of raw materials fluctuated greatly, and new business expansion fell short of expectations