Japanese science chemistry publishes annual report 2019. In 2019, the company achieved an operating income of 2.42 billion yuan, an increase of 54.27% over the same period last year, and a net profit of 178 million yuan, an increase of 73.12% over the same period last year.
The profit growth in 2019 is mainly due to the substantial increase in product sales and the increase in gross profit margin. 1) in terms of operating income by product, the operating income of ACR, ACM and ACS in 2019 increased by 20.31%, 91.27% and 119.51% to 8.69,14.95 and 44 million yuan respectively. 2) according to the gross profit margin of ACR, ACM and ACS in 2019, the gross profit margin changed by 1.19,4.93 and-2.14 percentage points to 12.24%, 19.99% and 14.85% respectively. 3) the three expense rates decreased by 1.80 percentage points to 6.22% compared with the same period last year, of which the rates of sales and management (including R & D) expenses decreased by 0.01 and 1.88 percentage points respectively to 3.96% and 2.19%, respectively, and the financial expense rate increased by 0.09 percentage points to 0.07%. 4) sales of main business products increased by 79.77% to 250000 tons over the same period last year, of which the sales of ACR, ACM and ACS increased by 55.94%, 91.16% and 215.60% respectively in 2019.
The company is rich in production capacity, and is expected to greatly increase its revenue and profits after it is put into production. According to the announcement on Foreign Investment (2019-02-15), the company intends to invest 1.2 billion yuan through its wholly-owned subsidiary Qiheng New Materials to invest in the construction of "annual production of 330000 tons of polymer new materials project" (including 140,000 tons / year PMMA, 100000 tons / year ACS, 40,000 tons / year ASA engineering plastics, 40,000 tons / year functional membrane materials and 10,000 tons / year multi-functional polymer new materials project), is expected to be completed and put into production in 2021. In addition, according to the announcement on Foreign Investment (2019-06-17), the company plans to invest 1.05 billion yuan to build an "annual production of 200000 tons of ACM plant and 200000 tons of rubber film project" through wholly-owned subsidiary Nikko Rubber and Plastics, which is expected to be completed and put into production in 2021. The above projects have good development prospects and economic benefits, which will help to enhance the company's industry status and enhance the company's core competitiveness.
The company buys back 5.91 million shares, demonstrating management's confidence in future development. From October 31, 2018 to December 31, 2019, the company bought back 5.91 million shares, accounting for 1.39% of the company's total share capital, and paid a total amount of 40 million yuan (excluding transaction fees). All the repurchased shares will be used in the employee stock ownership plan or equity incentive plan.
Profit forecast and investment rating. We estimate that the EPS of the company from 2020 to 2022 will be 0.72,0.96,1.18 respectively. With reference to the valuation of comparable companies in the same industry, we think that the reasonable valuation multiple is 15-18 times PE in 2020, and the corresponding reasonable value range is 10.80-12.96 yuan, which is superior to the city rating.
Risk hint. Major products ACM, ACR prices fluctuate sharply; raw material prices fluctuate; macroeconomic downside risks; production capacity under construction is not up to expectations.
