It is proposed to issue no more than 500 million convertible bonds for projects with an annual output of 4,800 tons of ultra-high molecular weight polyethylene fiber and reflux

The specific amount to be issued is determined by the company's shareholders' meeting authorized by the company's board of directors within the above amount; each convertible bond issued this time has a face value of RMB 100 and is issued at face value.

The capital raised is invested in a project with an annual output of 4,800 tons of ultra-high molecular weight polyethylene fiber+supplementary working capital. Of these, the plan is to invest about 550 million yuan in ultra-high molecular weight polyethylene, of which 450 million yuan is planned to be raised; 50 million yuan of supplementary working capital is to be invested, of which 50 million yuan is to be raised.

Ultra high molecular weight polyethylene fiber is currently the fiber with the highest specific strength and specific modulus in the world. It is the fourth largest specialty fiber after carbon fiber, boron fiber, and aramid fiber.

In recent years, demand for ultra-high molecular weight polyethylene fibers has grown globally against the backdrop of three factors: improving product performance, expanding application fields, and increasing production capacity. In addition to traditional fiber for special protection and military equipment, its demand in the fields of civil security and marine industry has also shown rapid growth: in the field of civil security, it has good textile processing performance, and fabrics made of this fiber take into account the advantages of breathability, comfort, wear resistance, and long life; in the marine industry, they have advantages such as lightweight, high strength, no water absorption, and good insulation compared to steel wire cables.

According to data from the Forward-looking Industry Research Institute, the global demand for ultra-high molecular weight polyethylene fiber in 2020 was 98,000 tons, with a production capacity of 65,600 tons. It is expected that global demand will maintain a 10%-15% increase in 2020-25.

China's ultra-high molecular weight polyethylene fiber industrialization time is later than the international market, but market demand is rising year by year, from about 20,000 tons in 2015 to 67,600 tons in 2022; China defined ultra-high molecular weight polyethylene fiber as a key strategic material in the “First Batch Application Demonstration Guide Catalogue for Key New Materials”; in the same year, the theoretical demand for domestic ultra-high molecular weight polyethylene fiber surpassed 410,000 tons of domestic production capacity for the first time. In the future, the domestic industry will show a trend of shortage of supply. China's demand for ultra-high molecular weight polyethylene fiber in 2022 is 67,700 tons, with a production capacity of 47,800 tons.

The company proposed a two-wheel drive development strategy to enhance comprehensive strength

The company has formulated a two-wheel drive development strategy centered on “functional safety gloves and new microfiber materials”. On the one hand, we are focusing on deepening the functional safety gloves industry and building a leading global brand of functional safety gloves with refined, large-scale and international development ideas. Taking the extension upstream of the industrial chain as an opportunity to further optimize the product structure, enrich product categories, improve product performance, and reduce product costs through the application of new high-performance fiber materials in functional safety gloves; on the other hand, continue to strengthen the development and industrialization of new high-performance fiber materials, comprehensively evaluate other application fields of such high-performance fibers on the basis of satisfying the company's own use of functional safety gloves, and carry out selective entry, targeted development and innovative applications, and make full use of the company's customer resources and market advantages accumulated over many years in the field of functional safety gloves. New fiber materials and manufactured products are sold to domestic and foreign markets.

The company has flexible and flexible production capacity. The production line can produce ultra-high molecular weight polyethylene fibers of different specifications and adjust according to market demand. The company mainly increases revenue and profits by providing customers with ultra-high molecular weight polyethylene fibers, and sells products to terminal companies engaged in downstream industrial applications of ultra-high molecular weight polyethylene fibers through an order-driven sales model.

Maintain profit forecasts and maintain “buy” ratings

In order to respond to the country's development goal of raising the level of production and application of high-performance fibers, guarantee the stable supply of raw materials upstream of the company's main business, control the risk of fluctuations in raw material prices, expand the company's ultra-high molecular weight polyethylene fiber production capacity, meet the company's working capital requirements, and further enhance the company's comprehensive strength, the company plans to issue convertible corporate bonds to unspecified targets. We expect the company's net profit to be 139/1.90/241 million yuan respectively in 23-25, EPS of 0.96/1.30/1.66 yuan/share, respectively, and the corresponding PE of 15/11/9x, respectively.

Risk warning: Risk of capital raising investment projects not being implemented in a timely and full manner; risk of depreciation and amortization of additional assets in fund-raising investment projects; risk of capital raising investment projects absorbing additional production capacity and falling short of expectations; risk of performance fluctuations; international trade policy risk; risk of fluctuations in international market demand; risk of fluctuating raw material prices; risk of developing new products and new businesses; debt repayment risk and liquidity risk, etc.