Items:
The company's recent non-public offering plan has been accepted by the CSRC, and the company plans to raise 430 million yuan in private, of which 300 million yuan will be invested in the construction of 10, 000 tons of polyamide and 10, 000 tons of polysulfone projects in Chongqing.
Guoxin Chemical's viewpoint:
1. Benefiting from the rebound of the modified plastics industry, the company's profits improved significantly last year. The company's main products engineering plastic alloys and modified general plastics belong to the modified plastics industry, which began to pick up significantly after the industry bottomed out in 2018, driven by the improvement of the company's gross profit margin. Due to the strengthening of mergers and acquisitions and the implementation of equity incentives for core employees in recent years, the expense rate has increased, which makes the improvement of non-net profit deducted by the company limited. The company has been operating steadily in recent years, actively cooperating with well-known customers at home and abroad, such as Huawei, DJI, ZTE, BABA, XIAOMI, Hisense, Foxconn, Lenovo, Japan Daikin, Sony Group Corp, Korea Xiaoxing and so on. Take the initiative to improve product structure and customer quality, operating cash flow significantly improved.
2. The company actively develops special engineering plastics products such as LCP and PTFE, transforming to high-end application scenarios such as 5G and semiconductors. In recent years, aiming at the requirements of high-frequency, precision and integration of materials in the electronic and communication manufacturing industry and other high-end industries, the company has increased its research and development and investment in high-end fields. The company acquired Samsung's LCP business in 2014 and new PTFE products in Zhejiang Kesai in 2019. Because of their excellent electrical properties, these two new materials have important applications in 5G high frequency signal transmission and semiconductor manufacturing, and are expected to become a new driving force for the company's performance growth in the future.
3. The company announced the plan of non-public offering shares and continued to increase the size of special engineering plastics. The company plans to raise 430 million yuan in this non-public offering, of which 300 million yuan will be invested in the construction of 20, 000 tons of special engineering plastics polyamide and polysulfone (each with a production capacity of 10, 000 tons, to be completed in three phases) Due to its excellent performance, the new products have important applications in the fields of electronic communications, transportation, mechanical manufacturing, medical devices and so on. at the same time, it can realize product coordination with the company's existing special engineering plastics system and improve the company's layout in the special engineering plastics industry.
Investment advice:
According to our revenue and cost forecasts after the split, the company's revenue from 2020 to 2022 is expected to reach 1.502 billion yuan, and its net profit is 0.59 million yuan, representing a year-on-year growth rate of 251,11,000 yuan. Regardless of the impact of this non-public offering on the number of shares, the company's EPS in the next 3 years is 0.50 per share, 0.55 per share, and the corresponding pre-PE is 54-49-45 times. We are optimistic that the company will continue to develop in the direction of special engineering plastics business in the future, and continue to launch high-performance products for high-end application scenarios, in line with the trend of domestic substitution. In the case of the double improvement of product structure and customer quality, the company's overall gross profit margin has greater room for improvement. For the first time, we covered the company and gave it an "overweight" rating.
Risk Tips:
1) the epidemic situation affects the progress of resumption of work in downstream enterprises.
2) the construction progress of the new project is lower than expected.
3) the price of raw materials has risen sharply in the short term.