The improvement in demand and the rise in the price of raw materials have contributed to a sharp rise in the price of PA66 products. From the supply side, the domestic PA66 production enterprises mainly include Shenma, Huafeng, Huayang, Liaoyang Xingjia and so on. As of November 12, 2020, the operating rate of Shenma has reached 90%, and that of Huafeng Group has reached 50%. From the demand side, as the downstream demand picks up, the demand for PA66 increases. At the same time, the rise in the price of raw material adipic acid contributed to the rise in PA66 prices. According to Baichuan data, the price of PA66 has risen from 18000 yuan / ton in June 2020 to 29000 yuan / ton.
The company leads the world in the production capacity of nylon 66 industrial filament and cord fabric. The company is mainly engaged in the production and sales of nylon 66 industrial filament, cord fabric, slicing and other products. Nylon 66 chips are mainly used in synthetic fiber and engineering plastics, nylon 66 industrial filament is mainly used in tire cord fabric, airbag and other fields, nylon 66 cord fabric is mainly used in semi-steel radial tire and so on. PA66, the global nylon 66 slices production enterprises are mainly Invida, DuPont, O'Shengde, Solway, BASF, Asahi Huacheng and Shenma, Shenma nylon 66 slices production capacity of 180000 tons, Yingwei nylon 66 slices production capacity of 150000 tons, Jiangsu and Zhejiang nylon 66 slices production capacity of 110000 tons, Anshan nylon 66 slices production capacity of 40,000 tons.
Acquire the remaining equity of nylon chemical industry, invest in the construction of adiponitrile, and strengthen the advantage of upstream and downstream integration. The company issued shares and convertible bonds to China Pingshan Shenma Group to purchase 84870.00 shares of Henan Shenma Nylon Chemical Co., Ltd. held by China Pingdingcoal Shenma Group, accounting for 37.72% of the total share capital of Henan Shenma Nylon Chemical Co., Ltd. Nylon chemical industry is currently the largest producer of nylon 66 salt in China. The production capacity of nylon 66 salt is 300,000 tons per year, which is in the forefront of the world. At the same time, the company invested 300 million yuan to set up a wholly-owned subsidiary Henan Shenma Xianglong chemical construction project with an annual output of 50,000 tons of adiponitrile. Adiponitrile is the key raw material for the production of nylon 66, which belongs to a high oligopoly product. the global adiponitrile mainly includes Invida, BASF, Oshengde and Asahi Kasheng, with a total production capacity of 1.72 million tons. Nylon chemical industry needs 150000 tons of adiponitrile per year, so expanding the production of adiponitrile is beneficial to strengthen the advantage of upstream and downstream integration.
Profit forecast and investment rating. We estimate that the EPS of the company from 2020 to 2022 will be 0.30,0.70,0.83 yuan respectively. With reference to the valuation of comparable companies in the same industry, we think that the reasonable valuation range is 20-22 times PE in 2021, corresponding to a reasonable value range of 14-15.4 yuan, which is better than that of the big city.
Risk hint. The risk of a fall in product prices; downstream demand is lower than expected.