IXPE industry leader, reduce cost and increase efficiency + capacity expansion + channel advantage under the steady high growth: electron irradiation crosslinked polyethylene (IXPE) is a non-toxic and environmentally friendly foam, more than 99% of the company's IXPE products are used in the field of PVC plastic floor in home building decoration. According to the announcement, the top 20 domestic PVC plastic floor export enterprises are mostly the company's customers, and the company's more high-end antibacterial enhancement series IXPE are used in Aili home and walrus new materials high-end series of latch floors and WPC/SPC floors, the end customer is the world's leading household building materials retailer Home Depot. In the past three years, the company's revenue compound growth rate of 47%, net profit growth rate of 132%, comprehensive gross profit margin reached 48%. The company's IXPE production capacity has rapidly increased from 2213 million square meters in 2017 to 7415 million square meters in 2019. The IPO investment project will build 100 million square meters of new production capacity and carry out technical transformation of the 1600 million square meters old production line. Under the capacity expansion, the semi-finished products from outside the company are reduced, coupled with the continuous improvement of the company's production process, reducing costs and increasing efficiency is obvious.
Downstream PVC plastic flooring industry has developed rapidly in recent years, and the volume of domestic OEM and ODM flooring enterprises has expanded rapidly: the United States has had a "toxic floor" incident since 2015, and the formaldehyde Standards Act has been implemented since 2017. non-toxic and environmentally friendly PVC plastic flooring industry began to grow rapidly at a growth rate of more than 15%. Under the global division of labor, European and American PVC floor brands mainly rely on OEM and ODM products imported from developing countries or regions, and China has become the main exporter of PVC plastic flooring. According to customs data, the compound growth rate of China's PVC floor exports reached 22% in 2019, with a total export volume of US $4.842 billion in 2019, of which US $2.852 billion was exported to the United States, accounting for 85% of the total imports of the United States. The export of domestic PVC flooring companies, Eli home furnishings and walrus new materials, accounted for more than 99% of its total revenue. In 2019, the enterprise's revenue was 1.2 times and 4.1 times that of 2016, respectively, with a rapid expansion.
IXPE is expanded by downstream industries and the track is better, leading enterprises will fully benefit: according to the gross profit margin of Wind,IXPE enterprises is much higher than that of PVC flooring enterprises. The competition in the downstream PVC flooring industry is more fierce, while the IXPE subdivision industry is in a high-quality track with fast growth and high gross profit margin. It is estimated that the market size of IXPE in 2019 is close to 500 million US dollars. As a leading enterprise with more competitive advantages in product quality, customer resources and production scale, the company is expected to grow rapidly and maintain a leading position in the industry.
Investment suggestion: the company's net profit from 2020 to 2022 is expected to be 150 million yuan, 190 million yuan and 240 million yuan respectively, and the corresponding PE is 25,20 and 16 times respectively. Cover for the first time to give a buy-A rating.
Risk tips: downstream demand growth is lower than expected, market competition intensifies, raw material price fluctuations and so on.