The company is a small giant enterprise of C4 deep processing in South China, with remarkable advantages in location and technology. We are optimistic about the further expansion of the company's C4 deep processing industry chain in LPG and the continuous improvement of profitability after the new project is put into production. We expect the company to achieve a homing net profit of RMB 554, 666, 000 in 2023-2025, corresponding to EPS, 1.73, and 2.09, 2.60 yuan. Combined with PE and EV/EBITDA valuation, we give the company a "buy" rating of 21 yuan in 2023, corresponding to the first coverage of 12xPE in 2023.
South China C4 deep processing leading enterprises. Through the continuous improvement of production technology and the deepening of the layout of the industrial chain, the company has gradually formed a C4 industrial chain with isooctane, methyl tert-butyl ether (MTBE) and maleic anhydride as its core products. With the advantages of circular economy and location, the company has grown into the largest C4 processing enterprise in South China. The company currently has an annual production capacity of 30,206,000 tons of isooctane, MTBE and maleic anhydride. With the new projects and the construction of the first phase of the light hydrocarbon project, the company is expected to further deepen the product layout of the C4 industrial chain.
R & D resonates with regional advantages, and the cost advantage is significant. The company's main products isooctane and MTBE are mainly used as gasoline additives, and the demand is increasing steadily. Compared with competitors, the company's competitive advantage is mainly reflected in location and technology. Location: the company is located in Daya Bay area of Huizhou, and maintains long-term good procurement cooperation with CNOOC Huizhou Refining and Chemical Co., Ltd., the supply of raw materials is stable, and the price is superior to that of East China; the company's main sales area is South China, with fewer competitors and products with premium.
Technological advantages: after the maleic anhydride project was put into production, part of the steam was self-sufficient, which significantly reduced the cost of energy and power. Under the resonance of R & D and location advantages, the gross profit margin of the company's main products is in the leading position in the industry.
There is plenty of new production capacity and sufficient momentum for growth. At present, the project under construction of the company includes butanone co-production of ethyl acetate and the first phase of light hydrocarbon project. After the completion of the project, the company will increase the production capacity of 100,000 tons of butanone, 130000 tons of ethyl acetate, 240000 tons of maleic anhydride and downstream products. The downstream of the company's planned expansion of products involves the field of new energy and new materials, especially the biodegradable plastic plate. We are optimistic about the innovation and cost reduction of the company's products to help the rapid promotion of degradable materials.
Risk factors: macroeconomic fluctuations and policy uncertainty; LPG centralized procurement risk; raw material price fluctuation risk; impact risk of new energy vehicle promotion on the company's future business continuity; projects under construction are less than expected.
Profit forecast, valuation and rating: the company is a small giant enterprise of C4 deep processing in South China, with significant location and technological advantages. We are optimistic about the further expansion of the company's C4 deep processing industry chain in LPG and the continuous improvement of profitability after the new project is put into production. We estimate that the company's 2023-2025 net profit is expected to be 554, 666 million, corresponding to EPS 1.73, 2.09, 2.60, combined with PE and EV/EBITDA valuation, we give the company a 21-yuan price in 2023, corresponding to 2023 12xPE, the first coverage, and a "buy" rating.