The company is deeply involved in the middle and high-end market of nano silicon dioxide and ranks among domestic enterprises.
The company started with silica raw materials, then transformed downstream for more than ten years. By the end of 2022, the company had 14,000 tons of silica production capacity, including matting agents, adsorbents, opening agents and anti-rust pigments. Among them, matting agent products have a market share of 10 to 13% in the Asia-Pacific region since 2019, gradually achieving import substitution; currently, the market share of other products is relatively small, and there is plenty of room for future growth.
China's silica industry has structural surpluses, and there is plenty of room for import substitution for high-end products.
Silica is a highly active, renewable substance with a multi-microporous structure and high thermal stability, and is widely used. At present, the production capacity of China's silicon dioxide industry is mainly concentrated in low-end application areas such as tires, rubber, shoe materials, feed, etc., while production capacity in the middle and high-end market is insufficient and mainly relies on imports. According to statistics, in 2023, the average price of China's imported and exported products was 2656.17 US dollars/ton and 781.05 US dollars/ton, respectively. The price of export products is far lower than the import price. There is broad scope for importing silica in high-end fields such as matting agents, adsorbents, opening agents, anti-rust pigments, and catalyst carriers. The performance of the company's opening agent products is comparable to foreign giants. It entered the Sinopec supply system in 2021 and has the ability to replace imported products; the anti-rust pigment products developed conform to the green development trend of anti-rust pigments, and customers include world-renowned paint manufacturers such as Nippon, AkzoNobel, and Becco Coatings.
Business structure upgrade, focusing on the development of new nano materials business.
In the future, the company will focus on its main business and make every effort to develop the self-developed new nano materials business. After completion, the fund-raising project will add 20,000 tons of high-end silica production capacity to the company and increase the market share of the company's products. In addition, the company is actively promoting the launch of new products such as catalyst carriers and opening up new growth points. Silicon dioxide preparation technology applied to the catalyst field has entered the technical verification stage, and has obtained 3 invention patents. The company signed a framework agreement with the Maanshan Cihu High-tech Industrial Development Zone Management Committee, which includes the construction of a 10,000 ton catalyst carrier and a 20,000 ton water-based resin production line to actively develop new businesses.
Investment advice
Ling Wei Technology has a first-mover advantage in the domestic high-end silica field. With the expansion of production capacity and the launch of new products, there is broad scope for domestic replacement of the company's products, and the profit center is expected to increase. We forecast that in 2023-2025, the company's revenue will be 4.60/6.27/721 million yuan respectively, with year-on-year growth rates of 14.70%, 36.28%, and 15.04%, respectively, net profit to mother of 1.19/1.91/235 million yuan, year-on-year growth rates of 30.44%, 61.20%, 22.75%, EPS of 1.09/1.76/2.17 yuan/share, and PE of 22.48x, 13.95x, and 11.36x, respectively. Covered for the first time, a “gain” rating was given.
Risk warning
Progress in technology research and new product development falls short of expectations, and raw material prices fluctuate greatly