Event: on November 13, 2020, the company announced that it intends to set up a wholly-owned subsidiary Henan Shenma Xianglong Chemical Co., Ltd. (subject to the name approved by the industrial and commercial registration authority) in the nylon new materials industry agglomeration area of Pingdingshan City, Henan Province. to build a project with an annual output of 50,000 tons of adipic nitrile.
Main points:
1. The supply of nylon 66 is tight and the company directly benefits from the rise in prices.
Nylon 66 is widely used: about 40% of the world is made of synthetic fibers and 60% of the world is made of engineering plastics.
Synthetic fibers mainly include industrial filaments (such as tire cord fabric, conveyor belts, etc.), civil filaments, carpet filaments, airbag filaments, tows, etc.; the final products of engineering plastics are injection molded parts, including direct injection molding (primary slice direct injection molding) and modified re-injection molding. Nylon 66 engineering plastics have the advantages of high strength, good rigidity, impact resistance, oil and chemical resistance, wear resistance and self-lubrication. Nylon 66 engineering plastics are mainly used in auto parts, household appliances, power and electronic devices, railway transportation and other fields.
The supply of nylon 66 is tight, and the price of nylon 66 has risen rapidly: since the fourth quarter of 2020, the price of nylon 66 has risen 7800 yuan, or 36.8%, to 29000 yuan / ton from the end of September. On the one hand, benefiting from the recovery in the automotive sector of the downstream demand side (1), in October 2020, China's monthly passenger car sales continued to improve by + 6.34% compared with the same period last year. (2) in September 2020, the output of major household appliances in China increased year-on-year, including color TV sets (+ 13.1%), freezers (+ 102.2%), refrigerators (+ 28.2%), household washing machines (+ 13.3%) and so on. On the other hand, due to the tight supply of adiponitrile at the raw material end, the supply of NVIDIA Corp adiponitrile plant was reduced, and O'Shengde announced that adiponitrile and hexanediamine were increased by 350USD / ton. Due to the outdated plant, the prices of adiponitrile and hexanediamine have risen greatly in the past, which are basically due to the suspension or maintenance of the production unit due to force majeure. This also reflects the tight balance between supply and demand. The price of adipic acid, another raw material, has also risen significantly recently, rising 1997 yuan from the end of September to 8130 yuan / ton, an increase of 32.6%.
The company's nylon industrial chain layout is perfect, performance flexibility: the company is mainly engaged in nylon 66 industrial filament, cord fabric, slicing and other products production and sales. In September 2020, the company issued shares and convertible bonds to buy 37.72% of the nylon chemical company held by China Pingdingshan Shenma Group, a controlling shareholder, with a consideration of 2.086 billion yuan. after the completion of the transaction, Nylon Chemical Company became a controlling subsidiary of the company. the shareholding ratio increased to 73.96%. In the later stage, the company will also acquire the 26.04% stake in Nylon Chemical Company held by the Industrial Transformation and Development Fund in cash, achieving 100% holding. At present, the company has adipic acid (290000 tons), hexanediamine (130000 tons), nylon 66 salt (300000 tons), nylon 66 slices (190000 tons), industrial silk (120000 tons) and cord fabric (70,000 tons). The company has a long-term cooperation with NVIDIA Corp and has advantages in supply. From January to September 2020, the company sold 32800 tons of nylon 66 industrial silk (49478 tons in 2019), 45803 tons of nylon 66 cord fabric (63581 tons in 2019), 117040 tons of nylon 66 slices (153011 tons in 2019) and 141997 tons of adipic acid (160805 tons of export in 2019), directly benefiting from the increase in the price of end products and high performance flexibility.
two。 Layout of adiponitrile project, opening up the whole industry chain of adiponitrile-hexanediamine-nylon 66, there is no own technology for large-scale industrial production of adiponitrile in China: adiponitrile is mainly the upstream raw material of nylon 66, and the global production capacity of adiponitrile in 2018 is less than 1.75 million tons. Only Invida of the United States, BASF of Germany, Osengde of the United States and Asahi Kasei of Japan produce it with a high degree of oligopoly (CR1=60%,CR2=83%). CR3=98%), the technical blockade is serious. China relies entirely on imports of adiponitrile, with an import volume of 293000 tons. China's "adiponitrile-hexanediamine-nylon 66" industry chain is facing an awkward reality. The nylon 66 market is in China, importing 277800 tons in 2019, with a degree of external dependence of 36%. The core raw material is dichloronitrile.
The company lays out 50,000 tons of adipic nitrile project to open up the whole industry chain: the company needs 150000 tons of adipic nitrile every year. The company plans to invest 1.19336 billion yuan in the nylon new material industry agglomeration area in Pingdingshan City, Henan Province to build a project with an annual output of 50,000 tons of adipic nitrile. The technology of the project comes from the technology of direct hydrocyanidation of 500t/a butadiene to adiponitrile developed by Chongqing Zhongping Ziguang Technology Development Co., Ltd., which is controlled by China Pingdingshan Shenma Energy and Chemical Group Co., Ltd. The 500t/a pilot plant has achieved continuous operation, and the adiponitrile products have been tested by downstream enterprises to meet the hydrogenation requirements. The project is expected to invest 1.14252 billion yuan in construction, 20.34 million yuan in interest during the construction period, 30.5 million yuan in working capital, 2 years in construction period, 1.12299 billion yuan in annual sales income, 16.17% in investment internal rate of return (before tax) and 11.4% in investment internal rate of return (after tax). Investment payback period (pre-tax) 6.64 years, investment payback period (after tax) 8.17 years.
3. Multiple projects under construction to promote growth
The company's projects under construction also include: (1) Zhongping Shenma Jiangsu New material Technology Co., Ltd. has an annual output of 30,000 tons of nylon 66 slicing project, the overall project has been completed and is currently being debugged. (2) Henan Pingmei Shenma Nylon material (Suiping) Co., Ltd. has an annual output of 25000 tons of BOPA film project, and the preliminary formalities such as project record, safety assessment, environmental assessment and energy saving evaluation have been completed; the land has been delisted; the equipment bidding for the main supporting production lines has been completed and the supply contract has been signed, which is scheduled to be completed and put into production by the end of 2021. (3) Henan Pingmei Shenma carbon gathering material Co., Ltd. has an annual output of 100000 tons of PC project, and the preliminary formalities such as project record, safety assessment, environmental assessment and energy conservation evaluation have been completed; the land has been delisted; the technology and equipment contracts for major supporting production lines have been completed, and the equipment is in the process of production and is scheduled to be completed and put into production by the end of 2021.
At the same time, the company issues convertible bonds to raise matching funds for the nylon chemical company (1) 30,000 tons / year 1pi 6-hexanediol project, with a total investment of 307.45 million yuan. The construction period of the project is 2 years. It is estimated that the financial internal rate of return of the project after income tax is 14.62%, and the payback period of investment after income tax is 7.71 years. (2) the nylon chemical industry supporting hydrogen and ammonia projects, with a total investment of 2.3 billion yuan.
The construction period of the project is 28 months, and the production capacity of 400,000 tons of liquid ammonia and 400 million N square meters of hydrogen will be formed after completion. It is estimated that the financial internal rate of return of the project after income tax is 15.23%, and the payback period of investment after income tax is 7.32 years, which has better economic benefits.
In the third quarter of 2020, the company increased capital expenditure by 462 million yuan, projects under construction reached 1.452 billion yuan, fixed assets reached 4.393 billion yuan, and projects under construction / fixed assets reached 33.05%.
4. Profit forecast and rating
Assuming that the new project of the company is put into production smoothly, we estimate that the return net profit of the company from 2020 to 2022 is 371 million yuan, 729 million yuan and 1.054 billion yuan respectively, corresponding to 0.44,0.87,1.26 yuan for EPS, and 23,12,8 times for PE. Consider that the company is the leader of nylon 66, "adiponitrile-hexamethylene diamine-nylon 66" whole industry chain layout, BOPA film, hexanediol, PC and other projects under construction to promote growth, maintain the "buy" rating.
Risk tips: macroeconomic decline, product prices fluctuate sharply, the production progress of projects under construction is not as expected, safety and environmental protection.