The polyether amine industry is at its bottom in the short term, and long-term demand growth is expected to lead to a recovery in product profitability.
Polyetheramine prices and gross profit declined sharply due to factors such as falling short of expectations in the wind power sector and loose supply expectations. In the long run, we believe that the increasing demand for new energy sources such as wind power and shale gas may drive up the price of polyether amines, and product profits will return to a reasonable position. The company's polyether amine products have obtained EU REACH registration and German Lloyd's Register certification. Their production technology and product quality have reached international standards, and successfully achieved import substitution. The company's polyether amine production capacity has reached 20,000 tons/year, and the production capacity under construction is 20,000 tons/year. The expansion of production capacity can break the company's production capacity bottleneck and meet the growing downstream demand in the future.
The company's COC products are about to be released, which is expected to open up a new revenue growth curve. COC/COP has excellent properties and can be widely used in optical, medical and packaging materials. In the field of optics, COC/COP can be used to manufacture various optical components such as lenses, display films, and 5G antenna covers. Compared with major transparent optical polymer materials such as PMMA and PC, COC/COP has the characteristics of low density, low water absorption rate, high heat resistance, and low dielectric constant, and the share of applications in the field of optics is expected to gradually increase in the future. COC/COP synthesis is very difficult. Currently, supply-side production capacity is concentrated, and the market is mainly monopolized by Japanese companies. Many Chinese enterprises are striving to break the technology monopoly and actively replace domestic production. The company has been deeply involved in the field of optical materials for many years, and its deep technical reserves and experienced R&D team have laid the foundation for the replacement of COC in domestic production. Currently, the company's COC production line is under construction, and production capacity is imminent. The product indicators can initially be compared to the level of imported products, and there are already interested downstream customers.
Resins for optical-grade polymer materials benefit from continued growth in demand in the automotive industry. The company's optical material products have good high gloss, brightness, abrasion resistance, medium resistance and weather resistance, and are widely used in light-curing coatings on high-end automotive surfaces. In 2023, the company's optical materials were affected by a decline in overseas demand, and both prices and gross margin declined. In the long run, as production and sales of new energy vehicles continue to increase, and core components such as NEV batteries place new requirements on automotive coatings such as fireproof insulation, downstream demand for automotive coatings will continue to rise, and the company's optical materials may benefit.
Investment advice: COC/COP supply-side production capacity is concentrated, and currently the market is mainly monopolized by Japanese companies. We believe that the company's new COC project can break the technological monopoly of foreign companies and achieve domestic replacement. The commissioning of the project is expected to open up a second revenue growth curve for the company and lay the foundation for the company's future performance growth. As a result, we expect Akoli's revenue for 2023-2025 to be $540/7.24/1,067 million, up -24.23%/33.37%/48.05% year-on-year, and net profit to mother of 0.23/0.63/160 million yuan, respectively, up -80.67%/169.74%/154.74%, and corresponding EPS of 0.26/0.71/1.82 yuan respectively. Combined with the company's closing price on March 1, the corresponding PE was 146/54/21 times, respectively. Upgraded to “Buy” rating.
Risk warning: industry competition risk, COC overcapacity risk, risk of cyclic olefin polymer industrialization falling short of expectations, production safety risks