Honghui New Materials is a leading enterprise in the specialty vinyl chloride copolymer industry. Its main products are chloroacetate resins and water-based paint bases. It has core competitiveness in terms of production process, production and marketing scale, technology research and development, and market channels. The company is one of the few companies in the world that can water-based special vinyl chloride copolymers and promote their application. It has successfully entered the procurement systems of well-known global ink and paint manufacturers such as DIC (DIC), SUN CHEMICAL (HUBER), FLINT (SIEGWERK), PPG, AKZO NOBEL (AKZO NOBEL).
Special vinyl chloride copolymers are a new chemical material with good development prospects. Special vinyl chloride copolymers are one of the main resin/substrates for ink (color-containing sheets and colorants), coatings, adhesives, and plastic processing (including magnetic cards, plastic floors, engineering plastics, construction profiles, etc.). Downstream PVC products and other new applications with high added value drive the long-term development of the specialty vinyl chloride copolymer industry.
Water-based industrial coatings are the development direction of the paint industry, and there is broad scope for development. Benefiting from VOC emission reduction requirements, the water-based industrial coatings industry is developing rapidly. In addition to traditional industrial coatings, application fields such as water-based inks and water-based adhesives also have good market prospects. The penetration rate of water-based industrial paint in China is far below the international level. At the same time, the raw material water-based resin also limits the quality of local products, and there is great potential for future improvement.
Honghui New Materials' water-based series products have been industrialized and will be rapidly upgraded in the future. The company's water-based industrial paint base - water-based resin, has been gradually industrialized since 2017, and sales revenue has increased rapidly. In 2019, revenue from water-based products accounted for 14% of the company's total revenue. In the future, the company will continue to optimize technical performance, expand product production capacity, and enrich application fields.
Company profit forecast and investment rating: We expect the company's net profit from 2020 to 2022 to be 90 million yuan, 104 million yuan and 121 million yuan respectively. The corresponding EPS will be 0.83 yuan, 0.96 yuan and 1.11 yuan respectively.
The current stock price corresponds to 25, 21, and 18 times the PE value from 2019 to 2021, respectively. Optimistic about the market prospects of the company's chlorinated vinegar resin and water-based industrial paint bases, it covered a “recommended” rating for the first time.
Risk warning: product and raw material prices fluctuate; downstream promotion falls short of expectations; market competition intensifies.
