Main points of investment:
Core point of view: the company started from the textile auxiliaries business, the existing business covers textile chemicals, leather chemicals, petroleum fine chemicals and other fields. The company and Zhejiang Sinopec joint venture Derong Chemical (50% each) to build C5/C9 deep processing project. We believe that the unit scale of the project is large, and relying on Zhejiang Petrochemical, it has a stable source of raw materials, and can effectively reduce the project investment cost and improve economic benefits. In 2019, the company's net profit is 110 million yuan, and we expect the profit of the C5/C9 project to increase significantly after reaching production.
The company's return net profit increased steadily from 2018 to 2019. After 2018, due to the change of the business model of the holding subsidiary Zhongwei Chemical (from self-management to commissioned processing), the company's income from products such as isooctane with low gross margin declined. Although the company's income fluctuated, the gross profit margin increased steadily and the overall gross margin was relatively stable.
From 2015 to 2019, the gross profit of the company was basically maintained at 45-600 million yuan. In 2019, the company achieved revenue of 1.571 billion yuan,-5% year-on-year, and net profit of 110 million yuan, + 110% (before adjustment).
Textile chemicals have high gross profit margin and stable gross margin, which contribute to the company's main profits. 2020H1, the company realized income of 600 million yuan and gross profit of 237 million yuan, of which textile chemicals contributed 68% and 76% respectively.
In 2015-2019, the gross profit margin of the company's textile chemicals was stable at 39% Mel 45%, which was the highest among the main products, and the gross margin of textile chemicals was basically stable at 3.8-460 million yuan.
Joint venture with Zhejiang Sinopec to build C5/C9 comprehensive utilization project. Taking the subsidiary Derong Chemical as the platform, the company cooperates with Zhejiang Petrochemical to develop the field of comprehensive utilization of ethylene cracking by-product C5/C9.
The project is located in Zhoushan Green Petrochemical Base with a total investment of 3.253 billion yuan, of which the first phase investment is 2.553 billion yuan and the second phase investment is 701 million yuan. The project uses Zhejiang Sinopec cracking C 5, styrene extracted C 9, heavy cracking crude gasoline as raw materials to produce isoprene, m-pentadiene, dicyclopentadiene, m-pentadiene resin, C9 cold polymer resin, DCPD resin and other products, which are mainly used in adhesive, road sign paint, rubber and other fields downstream.
2020H1 and Derong chemical projects are progressing steadily, and the company plans to put into production at the same time as the second phase of Zhejiang Petrochemical Company.
Relying on Zhejiang Sinopec, it has the advantages of raw materials and cost. Derong Chemical C5/C9 comprehensive utilization project unit has a large scale, and relying on Zhejiang Petrochemical, has a stable source of cracking C5/C9 raw materials. At the same time, the project can fully rely on the perfect public works facilities and auxiliary facilities of the Zhejiang petrochemical project, which can effectively reduce the project investment cost and improve the economic benefit. According to the company's "2020 non-public offering of A-shares", the average annual net profit of the first phase of the project is more than 300 million yuan.
It is proposed that the non-public offering will raise no more than 700 million yuan for the first phase of Derong chemical project. The company plans to issue no more than 700 million yuan in non-public offering for the construction of the first phase of Derong chemical project. The non-public offering plans to issue no more than 62.8846 million shares, of which the de Midea Group, which is controlled by the actual controller, intends to subscribe for no less than 3.0167 million shares.
Profit forecast and investment rating. We estimate that the return net profit of the company from 2020 to 2022 is 97 million yuan, 191 million yuan and 231 million yuan respectively, the EPS is 0.23,0.45,0.55 yuan respectively, and the BPS is 4.63 yuan in 2020. With reference to the comparable company's valuation, we give it 2.2-2.4 times PB in 2020, corresponding to a reasonable value range of 10.19-11.11 yuan, with a "better than the market" rating for the first time.
Risk hint: product prices fluctuate sharply; C5/C9 deep processing project process is not as expected.
