Incidents: In 2020, the company achieved revenue of 1,153 million yuan, +28.07% year on year; achieved net profit of 65 million yuan, +36.79% year on year; achieved net profit of 55 million yuan after deduction, +200.04% year on year. In the fourth quarter alone, the company achieved revenue of 397 million yuan, +48.45% year on year, +49.75% month on month; realized net profit of 18 million yuan, -29.51% year on year, +73.21% on month; achieved net profit of Fumo after deduction of 14 million yuan, +397.47% year on year, +96.61% month on month. The company plans to distribute a cash dividend of 1 yuan (tax included) for every 10 shares to all shareholders and transfer 7 shares to every 10 shares of capital reserve.
The product structure has been optimized and upgraded, and LCP and PTFE have performed well. Affected by the epidemic last year, demand in China's automobile and home appliance markets was low, and the traditional modified plastics industry was greatly impacted. The company optimized its customer structure and seized the opportunity of meltblown materials for masks, and the modified general plastics sector achieved revenue of +59% to 449 million yuan. In addition, the company made full use of the advantages of polymer synthesis to develop the high-end product market, and the engineering plastics sector achieved revenue of +36% to 643 million yuan.
Benefiting from the promotion of 5G and OLED, the company continued to release LCP and PTFE. (1) In September 2020, 5,000 tons of LCP production capacity were added and put into operation (company announcement, total production capacity after production was 8,000 tons). LCP's revenue increased 63% last year. Walter Special, the company's LCP R&D and producer, turned a loss into profit in 2019, and achieved net profit of 8.4 million yuan in 2020 (1.72 million yuan in the first half of the year). (2) The company's PTFE film materials have been successfully applied in mass production in the high-frequency PCB industry, and large-scale applications have also been achieved in the fields of communication and electronic flat panel displays. The company's acquisition of Deqing Cosai, which specializes in PTFE, achieved net profit of 9.46 million yuan in 2019 and 19.43 million yuan in 2020 (6.5 million yuan in the first half of the year). The company's product structure was optimized, the proportion of high-end products increased, and the overall gross margin was +1.66pct to 18.53% compared to 2019.
Chongqing special materials projects are expected to be implemented one after another starting this year. The company's 2020 fixed growth project Chongqing Changshou 10,000 tons/year of high-performance polyamide and 10,000 tons/year of high-performance polysulfone (phase 2 construction) is currently progressing smoothly, and it is planned to gradually start production capacity in 2021 (according to the announcement). The company's PPA has passed testing and verification work for downstream automotive electronic relay customers and has entered the batch supply stage. The company will utilize Chongqing's location advantage to achieve an industrial layout in South China, East China and Southwest China. At the same time, the project products will collaborate with the company's existing special engineering polymer materials to achieve import substitution and enhance the company's competitiveness. In addition, the company announced new foreign investment on March 20. It plans to invest 525 million yuan to build high-performance new materials, semiconductors, and 5G communication equipment projects with an annual output of 10,000 tons in Huzhou. This investment is expected to help the company expand downstream industrial chain, meet the product needs of existing and new customers, and enhance the competitiveness of the fluorine-containing materials market.
Investment advice: Buy an -A investment rating. We expect the company's net profit from 2021 to 2023 to be 131, 204, and 330 million yuan respectively.
Risk warning: certification and promotion of new materials fell short of expectations; project investment fell short of expectations; demand and prices for traditional products declined.
