Company dynamic events

The company issues a public announcement to raise the same amount of funds to replace the funds needed for the previous fund-raising projects that have been paid by bank acceptance drafts, and to continue to use bank acceptance drafts to pay for the funds involved in the fund-raising projects during the implementation of the subsequent fund-raising projects, and to raise funds for the same amount of replacement. This replacement involves 111.6932 million yuan. We comment on the recent business trends of the company.

Comments on matters

The construction of the fund-raising project is coming to an end.

According to the announcement, the company used the raised funds to replace the previous investment in the form of acceptance bills, totaling 111.6932 million yuan. According to the announcement, by 2020, the company has invested 309.8909 million yuan in fund-raising projects, of which 266 million yuan has been invested in the use of raised funds, the progress of the project has entered the fourth construction stage, and the main building has been basically completed. The filling area has been basically installed, and some of the main buildings have begun to install equipment.

According to the speculation of the corresponding capital investment progress, we think that the construction of the company's fund-raising project is nearing completion and will soon enter the stage of trial production verification. According to regulatory regulations, the new production line needs to carry out trial production of auxiliary materials and verification of preparation stability, which usually takes about half a year, and it is expected that the production line will enter the actual production phase in the third quarter of this year.

The company's fund-raising project is the construction of the industrial base of 20000t/an injection accessories and ordinary medicinal accessories. After the project reaches full production, it is expected to increase the production capacity of medicinal accessories by 20000 tons per year. During the 3-year production period, the production load is 40%, 60% and 80% respectively, reaching production from the fourth year of the production period. After reaching production, the annual sales income is 862.8223 million yuan, the annual net profit after tax is 206.9013 million yuan, the internal rate of return (after tax) is 27.50%, and the static investment payback period (after tax) is 6.25 years.

The base oil price index 2020Q4 rises 25%. The Demeng plant is expected to start the production of propylene oxide, the company's leading product, the main raw material of lube base oil. since April last year, the price of propylene oxide has risen sharply. According to wind data, the ex-factory price of Shandong Binhua was 9550 yuan / ton at the beginning of last year. By April, the price gradually dropped to 6850 yuan / ton, and then showed an upward trend, rising to about 19000 yuan / ton in November. Then there is a big fluctuation, the current price is 19000 yuan / ton.

According to the lube base oil price index released by Zhuo Chuang Information, for the whole of last year, the base oil price index rose from falling to rising at the end of October, from about 575 to about 710, an increase of nearly 25%.

According to the announcement of the company's operating data in the third quarter of 2020, the average purchase price of the company's main raw materials dropped by about 2% to 14% in the first three quarters compared with the same period last year, of which the purchase price of propylene oxide was 8900 yuan / ton, slightly lower than the same period last year, but at the same time, the average selling price of base oil was 14222 yuan / ton, down 16% from the same period last year. The company stopped production and maintenance for one and a half months in the third quarter, which to a certain extent reduced the impact of the scissors difference between rising raw materials and falling base oil prices on the company's profits. The price of the company's base oil gradually increased in the third and fourth quarter, and the gross profit margin of the company's base oil business sector is expected to recover in the fourth quarter.

In terms of base oil production and marketing, in the first three quarters of this year, base oil output was 21615 tons, sales volume was 22940 tons, and production and sales rate was 106 percent. The company's sales are smooth, and it is estimated that production capacity will continue to tighten even though it is affected by the epidemic.

The company acquired Demeng Chemical last year and absorbed and merged it. Demeng Chemical has become another production base of the company's base oil. the completion of the production reporting process and the start of production are expected to be realized around the middle of the year, so as to alleviate the shortage of production capacity. From the point of view of the area of the chemical park, the Demeng plant is similar to the old will plant, and it is expected that after Demeng is put into production, the production capacity will at least double.

Risk Tips:

1. The epidemic situation repeatedly leads to a slowdown in demand, and the control of the epidemic affects the company's production, sales, circulation and other links.

2. Environmental protection and production safety risk: the company's raw materials are flammable and explosive dangerous goods, and there are risks of environmental protection and production safety.

3. the risk of intensified market competition, such as the entry of imported varieties into the market, the entry of new competitors, the extension of petrochemical enterprises downstream into the field of base oil, and so on.

4. If the investment project is not put into production smoothly and the product stability verification is not up to standard, it may take longer for the production line to debug, thus delaying the profit contribution.

Investment suggestion

Maintain a "cautiously overweight" rating for the next six months

It is estimated that the EPS of the company in 2020 and 2021 will be 0.80yuan and 1.08yuan respectively. Based on the closing price of 21.40yuan on January 19th, the corresponding dynamic price-to-earnings ratio is 26.78times and 19.76times respectively. The company's valuation is lower than the average price-to-earnings ratio of comparable companies and industries.

We believe that the company has established a strong standard barrier in the field of injection pharmaceutical excipients and has obvious advantages. In recent years, domestic biological agents, antibody drugs research and development and listing progress is rapid, the company is expected to occupy the vast majority of the incremental market. The increase in the price of base oil, the substantial expansion of production capacity and the increase in the number of new energy vehicles will promote the continuous improvement of the revenue and profits of the company's chemical business sector. The company's fund-raising projects are expected to begin to contribute performance in the fourth quarter of this year, and this year is expected to usher in a performance inflection point. Maintain a "cautiously overweight" rating for the next six months.