Advanced professional manufacturer of large-scale water treatment pharmacy. Taihe Technology focuses on the research and development, production and sales of water treatment agents, the main products include organophosphorus, polycarboxylic acids, compound agents and other three series, more than 60 kinds of products. The company breaks through the traditional intermittent single kettle operation mode of water treatment agent and creates the continuous production technology of water treatment agent in the industry. In the first half of 2020, the company achieved operating income of 778 million yuan, an increase of 43.05% over the same period last year, and a net profit of 126 million yuan, an increase of 50.69% over the same period last year, mainly due to the company's continued efforts to expand the market and the growth of sales.
The market of water treatment chemicals is growing steadily and has a broad development prospect. Water treatment agents belong to the field of chemical production in the field of water pollution treatment and water saving, which can be divided into industrial water treatment, municipal / water treatment, sewage / wastewater treatment and seawater desalination. According to BCC Research data cited in the prospectus, the global market for water treatment pharmaceuticals was $26.85 billion, $28.49 billion, $32.45 billion and $34.46 billion respectively from 2015 to 2018, and is expected to reach $465.60 billion in 2023. According to the prospectus citing data from MarketsandMarkets, China's water treatment pharmaceutical market totaled US $3.71 billion in 2017 and is expected to reach US $5.549 billion by 2022.
The company leads the industry in terms of production capacity and its profitability is basically stable. The company's operating income from January to June from 2017 to 2020 was 1.118 billion yuan, 1.245 billion yuan, 1.245 billion yuan and 778 million yuan respectively, up 24.61%, 11.38% and 0.04% from 2017 to 2019, respectively. The net profit from January to June from 2017 to 2020 was 99 million yuan, 186 million yuan, 172 million yuan and 126 million yuan respectively, with an increase of 47.54%, 88.66% and-7.80% respectively from 2017 to 2019. The comprehensive gross profit margin of the company from January to June from 2017 to 2020 was 26.38%, 32.87%, 29.98% and 29.91%, respectively.
Fund-raising projects are expected to increase market share and optimize the company's product structure. The company's IPO raised funds for "Water treatment Agent Project with an annual output of 280000 tons", "Water treatment Agent Series Project" and "R & D Center Construction Project".
And "replenish working capital". Among them, 80,000 tons of HEDP project has been completed and put into production in October 2017; PBTCA workshop, spray drying workshop and crystal second workshop have obtained approval for trial production; dichloropropanol workshop, acetic anhydride workshop, tetraacetylethylenediamine workshop and supporting public works facilities have been completed and are expected to be put into production within 2020; other fund-raising projects are also in the process of orderly progress. After putting into production, the company will further realize the effect of large-scale production, reduce the unit product cost and expand the market share.
Profit forecast and investment rating. We estimate that the return net profit of the company from 2020 to 2022 is 2.47,3.35 and 416 million yuan respectively, and the corresponding EPS is 1.14,1.55,1.93 yuan per share. We give the company 20-25 times PE in 2021, corresponding to the reasonable value range of 31.00-38.75yuan. For the first time, the coverage gives it a rating of "better than the market".
Risk hint. Raw material price fluctuation risk, fund-raising project implementation progress risk, performance decline risk.
