Leading domestic adhesives and coatings company. The company is committed to developing sealants and coatings. In 2019, the company expanded its business segment into the electronic adhesive field by acquiring 75% of Zhaoshun Technology's shares. The company's main products include silicone sealants, water-based sealants, electronic adhesives, asphalt paint and water-based coatings. The products are widely used in construction engineering, container manufacturing, LED driving power supplies, new energy vehicles and other fields. The company grasped the development opportunities for domestic substitution of high-end sealant products and consolidated its leading position in the field of construction and container sealants. In the first three quarters of 2020, the company achieved operating income of 8.3 billion yuan, an increase of 14.79% over the previous year; the net profit of the mother was 94 million yuan, an increase of 67.24% over the previous year.
The core product silicone sealant business is growing steadily and rapidly. Since 2007, the company has been introducing new types of sealants from abroad for research, and has taken the lead in making breakthroughs in the field of prefabricated construction sealants. The company positions its business in the middle and high-end markets, is in line with the development trend of real estate-related industries, is deeply involved in central cities and large customers, and is increasing its market development efforts for large door, window, and curtain wall manufacturing companies. The company has established long-term and good cooperative relationships with well-known domestic door, window, and curtain wall manufacturers such as Jianghe Chuang and Guangtian Fangte; it has also entered the brand libraries of large real estate companies such as Vanke, Wanda, and China Resources. At the same time, the company sells products on well-known domestic e-commerce platforms such as JD and Tmall, and actively explores emerging sales fields.
Water-based paint has a first-mover advantage and is an important strategic business growth point for the company in the future. Water-based paint is an emerging business that the company focuses on cultivating in response to the call of national environmental protection policies. It is applied to petrochemical equipment, container manufacturing, mechanical equipment manufacturing and construction engineering markets. In recent years, the container market has fully implemented “oil to water”
The policy provides a good opportunity for the development of the company's water-based coatings. The company has accumulated a broad customer base in the fields of steel structure manufacturing and petrochemical equipment, established an advantageous position, and maintained rapid growth in the industrial coating market. The company's asphalt paint products were influenced by the “oil to water” policy and were gradually replaced by water-based paint.
The non-public offering of shares does not exceed 46.76 million shares, and the total amount of capital to be raised will not exceed 364 million yuan. The company plans to use the capital raised for the “project with an annual output of 80,000 tons of neutral silicone sealant and 30,000 tons of modified silicone sealant” and the “project with an annual output of 15,000 tons of two-component silicone rubber and 8000 tons of vinyl silicone oil”. Achieving production of the silicone sealant project will help increase the production capacity and equipment capacity of the silicone sealant and ease the pressure on the company's production capacity. After the completion of the project, the production year can achieve an increase in sales revenue of 1,183 million yuan and an increase of 102 million yuan in net profit. The necessary parts required for two-component silicone rubber and vinyl silicone oil LED driving power supplies, new energy vehicles, etc. As market demand for LED driving power supplies and new energy vehicles gradually expands, the company will seize market opportunities, expand market share, and increase the company's profit level. The production year can achieve sales revenue of 256 million yuan and net profit of 158.337 million yuan.
Profit forecasts. We expect the company's EPS to be 0.55 yuan, 0.69 yuan, and 0.87 yuan respectively in 2020-22.
The combined contract industry is comparable to company valuations. We gave the company 20-23 times PE in 2021. The corresponding reasonable value range was 13.80-15.87 yuan. For the first time, coverage gave it a “superior to the market” rating.
Risk warning. Fluctuations in raw material prices and macroeconomic downturn.