Textile-based, deep processing as a spear, industrial chain improvement as a shield, and steady growth in performance. The company started with textile printing and dyeing additives at the Ninghai base, then started production at the Deqing base to open up the silicone deep processing market. Today's Yongxiu base in Jiangxi will extend the company to upstream raw materials in the industrial chain. Currently, the company has a total production capacity of 90,000 tons/year, of which the production capacity of textile printing and dyeing additives is 44,000 tons/year, and the production capacity of silicone deep processing products is 46,000 tons/year. The downstream application fields of the company's main products include textiles, agrochemicals, electronics/new energy, personal care, etc. The company's performance grew step by step as its production capacity expanded, and the company paid more attention to overseas market development and continuously increased its share of overseas revenue. In the future, the company is still planning to add more production capacity. We believe that the company's performance will reach a new level with the release of its new production capacity.
The company is in the field of silicone deep processing, which is more resistant to cyclical profitability. The silicone industry chain is divided into four links: silicone raw materials, monomers, intermediates, and deep-processed products. The price of silicone intermediates DMC showed obvious cyclicality. The profitability of upstream silicone monomer/intermediate companies was highly positively correlated with the fluctuation of silicone DMC prices, while the cyclicity of downstream silicone deep processing companies decreased significantly compared to silicone monomer/intermediate companies. The company is mainly a platform-based enterprise that carries out various applications based on silicone oil, so profits are more resistant to cycles.
Textile additives have consolidated the basic market, and silicone oil material platforms have blossomed more and extended to higher value-added applications. In terms of textile printing and dyeing additives, Runhe Materials focuses on finishing aid products and focuses on developing segmented block silicone oil products. Block silicone oil is increasingly recognized by the market due to its superior performance. While textile additives consolidate the basic market, the company is developing a variety of new silicone deep processing materials: among them, in terms of mold release agents, in addition to traditional aluminum alloy die-casting, the development of the automobile lightweight and wind power industries has all opened up demand space for the company's mold release agent products; in terms of personal care silicone oil, the company's self-developed low ring silicone oil can meet D5 replacement requirements, and the company's personal care silicone oil can be added to cosmetics, sunscreen and other products to improve the user experience of user products; in terms of thermal management materials, in addition to traditional thermal conductive silicone grease and thermal conductive silicone gel products, the company is expected to replace silicone oil coolant. The withdrawal of some fluorinated coolants from the market, Increase penetration rate.
Adjust profit forecasts and give a “buy” rating. We adjusted our profit forecast. We expect the company to achieve revenue of 12/16.2.1 billion yuan in 2023-2025, yoy +1%/+36%/+27%, and net profit to mother of 0.82/1.27/172 million yuan, yoy -9%/+55%/+35%, corresponding PE 26/16/12 times, respectively. While the comprehensive company is deeply involved in the deep processing of silicone, it continues to explore the characteristics of new products with high added value and high barriers, as well as its life cycle. We recommend giving the company a price-earnings ratio of 30 times in 2024, corresponding to the first target price of 30 yuan, and raising the investment rating to “buy”.
Risk warning: Capacity release and construction fall short of expectations; downstream demand falls short of expectations.