The company is the leader of domestic water treatment pharmaceuticals, with large scale and full variety, with continuous core technology and customer resources at home and abroad. The company's fund-raising projects are advancing steadily, capacity expansion and industrial chain extension go hand in hand, and the leading position of the water treatment pharmaceutical industry will be more stable. Give the company a valuation of 30 times PE in 2021, corresponding to the target price of 49 yuan, and give a "buy" rating for the first time.
Domestic water treatment pharmaceutical leader, rich in products, outstanding scale advantages. The company's main business products include scale and corrosion inhibitors, bactericides and algaecides, cleaning pre-film agents, chelating agents, dispersants, reverse osmosis agents, etc., which is one of the most complete water treatment pharmaceutical manufacturers, with a current production capacity of 265,000 tons per year. it is also one of the largest enterprises in China. In the first half of 2020, the company realized a net profit of 126 million, an increase of 51 per cent over the same period last year.
The market space of water treatment chemicals is broad, and the domestic growth rate is higher than that of the whole world. According to BCC Research, the global market for water treatment pharmaceuticals is expected to rise from $34.5 billion in 2018 to $46.6 billion in 2023. The Asia-Pacific region is the world's largest market for water treatment pharmaceuticals, with a share of 31% in 2017. China's market is growing rapidly, and BCC Research is expected to reach US $5.6 billion in 2022 and 8.3% CAGR in five years, which is faster than that of the world.
The company has mastered the continuous process, and high-quality products attract customers all over the world. The continuous method replaces the traditional open production with a fully closed production system, and the quality, production efficiency, investment per unit capacity and input-output ratio are all improved. this method can only be realized in large-scale production. The company's investment in production capacity per unit of the project has a greater advantage over its competitors. The proportion of customers at home and abroad is about 1:1, and the customer concentration is low, and the risk of a single customer is low.
Fund-raising projects greatly expand production, supporting the continuous improvement of performance. Raise funds to invest in water treatment agent projects with an annual output of 280000 tons and a series of water treatment agent products. The former invests 440 million, focuses on expanding production of water treatment agents such as HEDP, ATMP, PAA (S), effectively resolving capacity bottlenecks, with an expected profit of 370 million; the latter invests 330 million, pays attention to the comprehensive utilization of by-products and the extension of the industrial chain, reduces costs and expands downstream markets, with an expected profit of 740 million.
Risk factors: the construction of fund-raising projects is not as expected, the risk of technology loss, and the demand of the industry is not as expected.
Investment suggestion: the net return profit of the company in 2020-22 is estimated to be 273, 355, 000, 000, Taking into account the company's leading position in the water treatment pharmaceutical industry and the continued profit growth brought about by the future production capacity release and expansion into the downstream fine chemical industry, the company is valued at 30 times PE in 2021, corresponding to the target price of 49 yuan, with a "buy" rating for the first time.
