Incident: Sunscreen products are in peak sales season, and downstream orders are growing rapidly. As the temperature gradually rises, various types of cool sunscreen products have become popular in summer. Physical sunscreen equipment such as sunscreen clothing, sunscreen masks, and ice silk gloves has continued to be popular in the market recently. In addition, many merchants have launched new products such as “face kinis” with fish bones and blush masks. According to data from the Chinagoods platform, the number of searches for sunscreen products in March '24 increased 4.6 times compared to February, and the order data increased by about 1.6 times. Some downstream Yiwu factories that make sunscreen products received a large number of orders. Currently, some factory orders have been scheduled for August.
The rashguard market is growing rapidly and is expected to reach 55.4 billion yuan by 2026. In recent years, along with the rise in consumer awareness of sunscreen, the increase in lightweight outdoor activities, diversification of wearing scenarios, the combination of sunscreen and fashion, and the promotion of scientific and technological innovation, China's sunscreen clothing market has shown a steady growth trend. According to iResearch Institute data, China's sunscreen clothing market has reached 67.5 billion yuan in 2022, and the market size is expected to reach 95.8 billion yuan in 2026. Among them, sunscreen clothing accounts for more than 50% of the market and is predicted to reach 55.4 billion yuan in the sunscreen clothing market in 2026.
Nylon silk is the main material for sunscreen clothing, and has multiple properties of breathability, comfort, and cooling. As the role of sunscreen clothing in consumers' daily lives is becoming more prominent, its use in multiple scenarios has also brought about a further upgrade in demand. Consumers hope that sunscreen can not only fully meet the functional needs of sunscreen, sun protection, etc., but also meet the physical requirements for breathability, lightness, and coolness. The above changes in demand also support the further development of sunscreen clothing. Currently, sunscreen clothing on the market is mainly made of nylon and polyester materials. Among them, polyester material costs are relatively low, and the breathability is relatively insufficient; low skin-friendliness and dyeing fastness are weak; nylon has good moisture permeability and breathability. In terms of physical feel, nylon fabric is soft to the touch and has better skin-friendliness; and it also has good dyeing fastness and is not easy to fade. Furthermore, it is a high-end fabric for sunscreen clothing that also has the characteristics of being cool.
The main supplier of polymeric polyamide civilian slices is expected to benefit from downstream demand. Polymerization mainly engages in the new nylon materials business. For different application fields, the company's main products include three categories: fiber-grade slices, engineering plastic-grade slices, and film-grade slices. By the end of 2023, the company's post-equity production capacity was about 400,000 tons. We believe that the performance growth of upstream suppliers in the polymeric nylon industry chain is expected to benefit from the development of downstream demand for sunscreen clothing, and along with the concentrated volume of the company's production capacity in 24-26, it is expected that volume and price increases will be achieved in the future, and we are optimistic about the company's long-term performance development.
Investment advice: We expect net profit to be 2.80, 385, and 482 million yuan respectively in 2024-2026, with corresponding dynamic PE being 14X, 10X, and 8X respectively. The company has many years of experience in R&D and production of nylon 6 polymerization processes, and has multiple advantages in product quality and stability. The layout of the new product nylon 66 forms the company's second growth curve. Benefiting from the future development trends of the PA6 and PA66 industry and the pace of the company's production capacity expansion, we continue to be optimistic about the company's future growth space and maintain a “recommended” rating.
Risk warning: the risk of increased competition in the industry; the risk of fluctuating raw material prices; the risk of project implementation falling short of expectations.