Leading precious metal catalysts with strong R&D capabilities. The company's predecessor was the “Catalyst Research Institute of Northwest Nonferrous Metals Research Institute”, and is a pioneer in the research and production of precious metal catalysts in the field of fine chemicals in China. The company attaches importance to core technology's ability to innovate independently, and the R&D cost rate has remained around 3% over the years. As of 23H1, the company had 25 PhDs and 66 master's degrees, and R&D personnel accounted for 35%. Over the years of research and development, the company has more than 400 kinds of precious metal catalyst products, and a variety of new products are being developed.
Downstream applications are extensive, and there is broad scope for import substitution. Precious metal catalysts are widely used in medicine, new chemical materials and other fields. According to the New Thinking Industry Research Center, the demand scale of China's precious metal catalyst industry in '23 was about 20.56 billion yuan. From the perspective of stock markets, the company has benefited not only from increased demand in the downstream pharmaceutical and chemical industries, but also from increased penetration rates. China's high-end market for precious metal catalysts mainly relies on imports. The performance of some of the company's products is already comparable to that of international giants. For example, the company is the only domestic supplier of catalysts for chloroacetic acid. The amount of palladium used is lower than that of its peers, and the market share is about 30%. The market share is expected to increase further under the trend of import substitution. From an incremental market perspective, the catalyst market also benefits from downstream transformation and upgrading, such as the new demand brought about by mercury-free PVC production.
Relying on advanced technology to expand product categories and expand production capacity, open up the performance ceiling. In the past five years, the company has continuously optimized its product structure, improved product performance, and launched new products to bring new markets, driving steady growth in the company's revenue and profit.
Revenue for '22 was $1,882 million, CAGR for 18-22 was 32.5%, net profit was $221 million, and 18-22 CAGR was 50.4%. Looking forward to the future, the launch of new projects brings growth expectations. The company has laid out 4 projects, including a high-end functional catalytic materials industrialization project, to produce products such as alkane dehydrogenation catalysts, PVC mercury-free catalysts, hydrogen fuel cell catalysts, and non-precious metal catalysts, involving a new market for 10,000-ton catalysts. The new project will be gradually put into operation in 23-26. Among them, more than 2,000 tons of new production capacity is expected to land by the end of this year, which is expected to open up the performance ceiling.
Investment advice: We expect the company to return net profit of 144/2.17/299 million yuan in 23-25, respectively. Referring to comparable company valuations and historical PE, considering Kaili is the leading precious metal catalyst, it gave a PE valuation of 35 times in 24 years, corresponding to a target price of 58.2 yuan for 24 years. First coverage, giving a “buy” rating.
Risk warning: downstream demand falls short of expectations, precious metal price fluctuations, capacity release falls short of expectations, etc.