Supply and demand improved and the price of epoxy resin stabilized and rebounded. As of January 21, 2021, from the point of view of the supply side, the overall start-up of the epoxy resin plant has been reduced, and the market supply has been reduced. From the point of view of the demand side, the main application fields of epoxy resin are electronics, wind power and other fields. According to Zhuochuang information data, the price of epoxy resin rose from 21300 yuan / ton in early January 2020 to 25500 yuan / ton, and the price difference increased from 5941 yuan / ton to 9006 yuan / ton.
The company is an electronic grade epoxy resin leader. The company is one of the earliest foreign-funded enterprises in the epoxy resin industry to enter China, and the original technology comes from Dongdu Chemical Company of Japan. The company's products are mainly divided into liquid epoxy resin, flame retardant epoxy resin, solid epoxy resin and solvent epoxy resin. the company's flame retardant resin customers are mainly large enterprises in the copper clad laminate industry. including Japanese Panasonic, Guangdong Shantou Ultrasonic, Dongguan Lianmao, Guangzhou Hongren, etc., epoxy resin customers for powder coatings include Akzo Nobel Co., Ltd., American Ester Coatings and so on. At present, the production capacity of epoxy resin in Zhuhai plant is up to 155,000 tons / year. We believe that the company, as a leading company of electronic grade epoxy resin, will give priority to benefit from the increase in product prices. According to the company's 2020 performance pre-increase announcement, the company expects the 2020 return net profit to increase by 51.14 million yuan to 73.54 million yuan compared with the same period last year (after restatement); the non-return net profit in 2020 will increase by 7284 yuan to 87.61 million yuan compared with the same period last year (after restatement). The year-on-year increase is about 108%. In addition, the net profit after restatement in 2019 is 162 million yuan, and the net profit after deducting non-return is 67.43 million yuan.
The acquisition of Wuxi Hongren extends to the lower reaches of the industrial chain and opens up new profit growth points. The company bought its 100% stake in Wuxi Hongren from Guangzhou Hongren and Hong Kong Jufeng non-public offering shares at a price of 1.03 billion yuan. Wuxi Hongren is mainly engaged in the production and sales of epoxy glass cloth copper clad laminate for multilayer laminates, epoxy glass cloth semi-cured sheets for multilayer laminates and new electronic materials. Wuxi Hongren promised that the net profit of deduction in 2020,2022 and 2021 was not less than 8600 yuan, 9400 yuan and 120 million yuan respectively. We believe that this acquisition will help to enhance the integration advantage of the company's industrial chain and open up new profit growth points.
Profit forecast and investment rating. We estimate that the EPS of the company from 2020 to 2022 will be 0.24,0.35,0.39 yuan respectively. With reference to the valuation of comparable companies in the same industry, we think that the reasonable valuation range is 20-25 times PE in 2021, corresponding to a reasonable value range of 7-8.75 yuan, which is better than that of the big city.
Risk hint. The risk of a fall in product prices; downstream demand is lower than expected.
