A leading black enterprise in China [BL precipitated E_S dianum method M white AR carbon Y]. The company has been deeply involved in precipitated white carbon black for 20 years. At present, it has formed a complete industrial chain from raw materials sulfuric acid and sodium silicate to the final product silica, and has become the leading manufacturer of precipitated silica in China. By the end of 2022, the company had four production bases in Wuxi, Anhui, Fujian and Thailand, with an annual production capacity of 330,000 tons of silica and a production capacity of 100,000 tons under construction and planning, ranking third in the world.

The trend towards greening tires is expected to drive demand for precipitated silica. (1) The tire market is an important component of the demand for white carbon black. Adding white carbon black to the tread can reduce tire rolling resistance and improve the anti-slip index. With the implementation of the tire labeling law on a global scale, China's export orders as a major tire country will follow the trend and gradually increase the share of green tires. Demand for highly dispersed silica is expected to further increase, and global demand for highly dispersed silica is expected to reach 2.06 million tons by 2025; (2) From the supply side, leading overseas manufacturers occupy the high-end market, and domestic production capacity will continue to increase the product structure At the lower end, there is plenty of room for improvement in the performance and versatility of high-end products and overseas products; from a profit side perspective, with the further restoration of demand for downstream tires and the gradual release of new production capacity as the main raw material, soda ash, the profit of the precipitated white carbon black industry is expected to bottom out and rise.

New bio-based processes lead the industry, leading technology+high customer viscosity to consolidate the moat. (1) The company has strong R&D strength. Patents cover professional silicon dioxide production equipment, manufacturing technology and processes, and successfully developed a white carbon black process using the rice husk method. Compared with traditional processes, it can reduce the carbon footprint by about 140% and increase the product value by about 1,833 yuan/ton, which is expected to help the company further open up the global market under the concept of sustainable development; (2) Customers: Deeply cooperating with leading international tire manufacturers, the share of export revenue continues to increase. Compared with domestic sales, the company's export pricing model is more stable. Under high technical thresholds and customized product requirements, the company can build a stable structure. The profit moat.

First coverage, “additional” rating: The company is the largest white carbon black company in Asia and the third largest in the world. With the green upgrade of global tires and the release of production capacity at the company's Sanming and Thai bases, we expect the company's revenue in 2023-2025 to be 17.90, 19.34 billion yuan, and 2,232 billion yuan, respectively, and net profit to the mother of 4.36, 4.79, and 628 million yuan respectively. For PE, it is 13X, 12X, and 9X, respectively.

Risk warning: capacity expansion falls short of expectations; demand falls short of expectations