Key investment points:

A leading enterprise in the field of fine chemistry, with obvious advantages of integration and scale, the company is a leading enterprise in the field of fine chemistry. It has four production bases: Changle, Weifang, Changyi, Chongqing, and Xinganmeng, Inner Mongolia, and has achieved large-scale operation in fine chemical production. The company has the world's leading production capacity for mixed dimethyl dimethyl acid products, leading domestic production capacity for fatty alcohol series products and DCP products. The current production capacity includes 0.1 million tons of dimethyl dibasic acid, 0.047 million tons of fatty alcohol, and 0.043 million tons of plasticizer. In February 2023, the company's polycarbonate diol (PCDL) plant was completed and put into operation. In terms of production capacity, as of June 30, 2024, the infrastructure construction of the 35,000 tons/year blocked amine light stabilizer project at the Xiaying base in Changyi, Weifang has been completed and is expected to reach the scheduled state of use in December 2024; the 0.03 million tons/year binary alcohol project at the Changle base has completed process package preparation; and the Inner Mongolia Xinganmeng bio-based new materials project is undergoing project-related formalities. 0.06 million tons of dimethyl dibasic acid, expected to be completed in December 2025; 0.06 million tons of plasticizer, expected to be completed in December 2025.

R&D drives future growth, and the biobased layout opens up a second growth curve The company focuses on R&D. As of 2023, the company has been approved for more than 20 provincial technological innovation projects, and authorized 29 invention patents and 66 utility model patents. On the biobased side, the company successfully certified its biobased BDO products and passed the USDA biobased product certification in 2023. The company's biobased project is being built in three phases, with an investment plan of about 1.2 billion yuan. The construction will produce 0.05 million tons of succinic acid and 0.03 million tons of L-malic acid per year. In June 2024, the company invested in the construction of new bio-based materials in the Xinganmeng Economic and Technological Development Zone in Inner Mongolia and was undergoing a steady evaluation and announcement of the project. The bio-based BDO market is vast. According to Hengzhou Bozhi, the bio-based BDO market sales are expected to reach $272.06 million by 2026. As a pioneer in domestic bio-based BDO production, the company is expected to use its advantages in technology research and development, industrial chain integration, and market expansion to seize market opportunities and create a second growth curve.

Investment advice

The company is a leading enterprise in the field of fine chemistry. It has leading production capacity for fine chemicals, including dimethyl diacid, fatty alcohol, DCP, etc., and has the advantage of integration and scale. At the same time, the company has developed a biobased field and opened up a second growth curve. We expect the company's revenue for 2024-2026 to be 2.141/2.314/2.944 billion yuan, respectively, net profit to mother 0.242/0.335/0.467 billion yuan, and EPS 1.17/1.61/2.25 yuan respectively, corresponding to the closing price of 16.53 yuan on December 30, or PE 14/10/7 times, respectively. Referring to comparable companies Wanhua Chemical, Lianlong, and Meirui New Materials, the average PE value in 2024-2026 was 27/15/12 times. We are optimistic about the company's long-term growth, covered for the first time, and gave the company an “gain” rating.

Risk Alerts

Risk of a sharp drop in product prices, risk of sharp fluctuations in raw material costs, risk of project construction progress falling short of expectations