The company is the leader of acetic acid and is optimistic that the acetic acid industry will continue to be booming in the future. According to the company's 2019 annual report, the company has 1.2 million tons of acetic acid production capacity, 40,000 tons / year ADC foaming agent production capacity and 300000 tons of sulfuric acid production capacity, and its acetic acid production capacity ranks first in China. Benefiting from the expansion of downstream PTA and EVA industries, we are optimistic that the acetic acid industry will continue to be booming in 2021, when the company is expected to fully benefit from being the leader of acetic acid. We predict that the corresponding net profit from 2020 to 2022 is 2.32,14.26 and 1.213 billion yuan respectively, and the corresponding EPS is 0.22,1.36,1.16 yuan respectively, and the current stock price corresponds to 48.9,7.9,9.3 times of PE from 2020 to 2022 respectively. For the first time, coverage gives a "buy" rating.

The continuous expansion of PTA production capacity in the future is expected to greatly boost the demand for acetic acid in the future. Acetic acid may still be in a tight balance between supply and demand. New production capacity: according to Zhuangchuang data, Huayi Group plans to build 500,000 tons / year and 700,000 tons / year of acetic acid, which are expected to be put into production in May 2021 and December 2021 respectively. If the new acetic acid project is put into production smoothly, the total effective production capacity of the acetic acid industry will reach 9.85 million tons in 2021. Considering that the new acetic acid production capacity still needs to go through the capacity climbing period, we conservatively estimate that the total output of the acetic acid industry in 2021 will be 8.2138 million tons. The apparent consumption of acetic acid in 2020 is 7.2018 million tons. Considering that Dushan Energy will put 2.2 million tons of PTA into production in September 2020, and 19.3 million tons of PTA will be put into production in 2021, it is conservatively estimated that it will drive 452000 tons of acetic acid demand for the whole year. 800000 tons of EVA will be put into production in 2021, which is expected to drive the demand for acetic acid of 51900 tons. According to our estimation, the apparent consumption of acetic acid in China will reach 7.7057 million tons in 2021. The acetic acid industry may be in a tight balance between supply and demand.

The frequent overhaul of acetic acid plant, the shortage of acetic acid supply or the normal state in the future are expected to support the rise in acetic acid price. most of the acetic acid plants at home and abroad have a long life and relatively frequent breakdowns. Only the 350000-ton new plant in Hengli Petrochemical Company has not been overhauled from start-up to November 2020. Due to the force majeure encountered in overseas acetic acid plants in 2018, according to Wind data, the price of acetic acid once rose to 5500 yuan / ton. In January 2021, the 400000-ton acetic acid plant in Shunda, Henan Province was accidentally shut down and has not been restarted. In February, the 1.3 million-ton acetic acid plant in Celanese, Texas, USA was stopped by the cold wave, stimulating the rapid rise in acetic acid prices. At present, the spot price of acetic acid reaches 6450 yuan / ton. We expect the acetic acid plant to be overhauled frequently or become the norm in the future, which is expected to support the further rise of acetic acid.

Risk tips: macroeconomic downturn, sharp decline in crude oil prices, environmental protection and production safety risks