The company uses the circular economy model to maintain the steady development of traditional performance, while making use of the business layout in the field of hydrogen energy to open up long-term growth space. In addition, we believe that the company's sulfonated pharmaceutical business expansion and PVC capacity construction are expected to contribute performance support for the company in 2021, and maintain the target price of 15.30 yuan (14 times PE in 2021) and "buy" rating.
The performance is in line with expectations and may be under some pressure in 2020. The company released its annual report in 2019. During the performance period, the company realized operating income and net profit of 5.369 billion yuan and 1.226 billion yuan respectively, which were-4.19% and + 13.13% respectively compared with the same period last year. The performance of sulfonated pharmaceutical business was outstanding. Through product structure adjustment, the company achieved a significant increase in the average price per ton of products, which contributed a large increment to the company's performance. At the same time, The improvement of the profit of the fatty alcohol business is also one of the reasons for the improvement of the company's performance. Judging from the current situation, the company's 2020 performance may be under some pressure due to the epidemic.
The expansion of sulfonated pharmaceutical business is expected to continue to promote the company's performance growth. With the commissioning of the company's BA\ TA series products, the added value of the company's sulfonated pharmaceutical products has been further increased, the proportion of high value-added products has been further increased, and the gross profit margin has been significantly higher than before. Prior to the company's announcement, the board of directors examined and approved the proposal for the project to expand production and build the waste acid cracking project. After the completion of production expansion, the company's sulfonated pharmaceutical production capacity will increase from the current 30,000 tons to 60,000 tons, and BA production capacity will increase from the current 2000 tons to 6000 tons. It is expected to be put into production by the end of 2020, which is expected to bring significant performance improvement for the company in subsequent years.
Ethylene process PVC production capacity is under construction, after the launch is expected to contribute to stable performance. Based on the current chlor-alkali production capacity, the company previously announced that it is planning to build a 300000-ton VCM\ PVC project, which is expected to start operation in 2021. On the one hand, the company may rely on geographical advantages to steadily sell PVC terminal products, on the other hand, it is expected to solve the problem of chlorine consumption associated with chlor-alkali process, the company's integrated chemical industry and energy distribution will continue to deepen, and the utilization rate of raw materials and energy is expected to be further improved.
Actively deploy the hydrogen energy industry chain, performance take-off is expected. With the increasingly serious problems such as environmental protection and energy shortage, the development and utilization of clean energy Brooks no delay, and the hydrogen energy industry has entered a rapid expansion channel. The company seizes the opportunity of new energy and makes use of its location and the resource advantage of 10,000 tons of low-cost by-product hydrogen to join hands to enter the field of hydrogen energy and further deploy important links in the industrial chain such as hydrogen production, hydrogen storage and hydrogenation. In addition, the company's liquid hydrogen transport business is expected to enable the company to take the lead in seizing the technical peak of the hydrogen storage and transportation market.
Risk factors: raw material price fluctuation; photovoltaic industry policy fluctuation; hydrogen energy policy landing is not as expected.
Investment advice: the company uses the circular economy model to maintain the steady development of traditional performance, while using the business layout of the hydrogen energy field to open up long-term growth space, long-term optimistic about the company's point of view remains unchanged. Due to epidemic factors, the 21-year return net profit of the company adjusted for epidemic factors is 1.561 billion yuan (1.472 billion / 1.64 billion yuan), and 1.802 billion yuan in 2022, corresponding to the annual EPS forecast of 0.75 PE 1.26 yuan in 2020-21-22, maintaining the target price of 15.30 yuan (14 times PE in 2021) and "buy" rating.