The world's leading company for POF heat shrinkable films. The company is the largest POF heat shrinkable film manufacturer in the country and the second largest in the world. It has many series of products in 2 categories: POF ordinary heat shrink film and POF crosslinked heat shrink film. The company adjusted the product structure to increase the proportion of high-value-added POF crosslinked heat shrinkable films and high-performance heat shrinkable films. Since POF heat shrink film is superior to other heat shrinkable film products, it is gradually replacing other heat shrink film packaging materials in some fields, gradually becoming the most popular environmentally friendly heat shrink film packaging material in the world, and demand is expected to maintain steady growth. In the first three quarters of 2020, the company achieved revenue of 1,046 million yuan, +16.0% year on year, and achieved net profit of 122 million yuan to the mother, +82.3% year on year. Among them, the third quarter achieved revenue of 399 million yuan in a single quarter, +19.4% year on year, and net profit of the mother was 55.2072 million yuan, +152.0% year on year, with a steady increase in performance.
The gross profit of thermoplastic elastomers was corrected for the first time. The company entered the field of thermoplastic elastomers through its holding subsidiary Zhejiang Zhongli Synthetic Materials Technology Co., Ltd., and expanded high-quality customers in the cable, asphalt modification, shoe manufacturing, optical cable paste, lubricant adhesive and other industries. Since 2018, the company's thermoplastic elastomer revenue has maintained rapid growth, and the market has developed rapidly. The 2020H1 sector accounts for 37.7% of revenue. 2017-2019 Due to the market development period, the sector is in a state of loss. 2020H1, the sector achieved positive gross profit for the first time. As the market continues to expand, thermoplastic elastomers are expected to become a new growth point in the future.
Cut into the field of SEP and lubricant adhesives for 5G optical fiber paste. The company has successfully developed and mass-produced SEP products for 5G optical fiber paste, and has achieved batch supply to downstream companies. It has become a supplier to many domestic and foreign optical fiber and cable ointment manufacturers. The total mileage of fiber-optic cables in China in 2019 was 50.71 million kilometers. In the future, with the acceleration of 5G construction, demand for optical fiber cables will be stimulated, thereby driving the company's demand for SEP products for 5G optical fiber ointments. The company targets the huge market size of lubricants. Lubricant adhesives are important additives. The lubricant adhesives developed by the company have completed small-scale pilot production and driving tests, and will soon begin industrial promotion and application.
Profit forecast and investment rating: The company is a leading enterprise in the global POF heat shrinkable film industry. It has entered the field of thermoplastic elastomers through its holding subsidiary Zhejiang Zhongli Synthetic Materials. Its main products are used in the cable, asphalt modification, shoe making, optical cable paste, lubricant adhesive and other industries. SEP demand for 5G optical fiber paste is expected to benefit from the acceleration of 5G construction in the future. The company's EPS is expected to be 0.17, 0.30 and 0.40 yuan/share in 2020-2022, respectively, maintaining the “increase in holdings” rating.
Risk warning: Risk of falling product prices; project progress falls short of expectations; downstream demand for products falls short of expectations; uncertainty about large-scale production and import substitution of SEP for lubricant adhesive products and optical fiber paste.