Investment points:
Jiahua Energy announced its 2020 annual report. In 2020, the company achieved operating income of 5.568 billion yuan, an increase of 3.7% over the previous year, and achieved net profit of 1,304 million yuan, an increase of 6.26% over the previous year.
The increase in profit in 2020 was mainly due to lower expense ratios. Looking at operating income by product, fatty alcohol (acid), sulfonated pharmaceutical series products, sulfuric acid (total acid), chlor-alkali, steam, photovoltaic power generation, handling and related revenue in 2020 changed by 9.92%, -11.14%, -5.53%, -14.24%, 0.63%, 477.63%, and 0.32% respectively to 2,022 billion yuan, 732 million yuan, 77 billion yuan, 770 million yuan, 1,304 million yuan, 244 million yuan; 2) The gross margin of each product is shown as fatty alcohol (acid), Sulfonated pharmaceutical series products, sulfuric acid (total acid content), chlor-alkali, steam, photovoltaic power generation, handling and related gross margins in 2020 changed year-on-year respectively -0.32, -8.21, -19.51, -6.35, 5.39, 126.83, 0.95 percentage points to 19.49%, 52.53%, 29.21%, 32.23%, 36.65%, 74.30%, 80.39%; 3) Sales, management (including R&D), and financial cost rates changed year-on-year in 2020 -0.97, 0.62, - 0.95 percentage points to 0.27%, 6.91%, and -0.60%. The total three cost rate changes were -1.30 percentage points to 6.58%.
The company is speeding up the construction of major projects and laying the foundation for continued growth in the future. The company's “300,000 tons/year functional polymer material (PVC) project” and the “300,000 tons/year ethylene chloride and vinyl chloride (VCM) project” have entered the final installation stage. It is scheduled to be completed in the first half of 2021, and will enter trial production after obtaining trial production permits from relevant departments; the company is promoting the 4,000 tons/year BA project (sulfonation industry safety and environmental protection improvement project) in an orderly manner and supporting the construction of the continuous sulphur trioxide sulfonation technical improvement project. The 4,000 tons/year BA project has entered the installation stage, and is scheduled to be completed It was completed in the first half of 2021, and trial production began after obtaining trial production permits from relevant departments. The company's low-temperature ethylene (ethane) and propane concrete full capacity tanks (one each) are still in the outer tank construction stage.
Set up an industrial fund to seize opportunities for the restructuring and integrated development of the semiconductor industry. The company invests 500 million yuan to set up an industrial fund. The company can use the resources and capital raising channels and professional investment judgment capabilities of professional investment institutions in the upstream and downstream of the semiconductor industry. On the one hand, it can find investment opportunities for the company and obtain a better return on financial investment by investing in high-quality targets; on the other hand, it also helps the company find high-quality targets to support the company's entry into the semiconductor field, and nurture the company's promising target enterprises in the semiconductor field in the early stages, which can reduce the risks posed by the company's direct investment.
Profit forecasts and reference ratings. We expect the company's EPS to be 1.18, 1.27, and 1.38 yuan respectively in 2021-2023. Referring to the valuations of comparable companies in the same industry, we think the reasonable valuation range is 11-13 times PE in 2021, and the corresponding reasonable value range is 12.98-15.34 yuan, giving it a superior market rating.
Risk warning. The progress of production capacity investment under construction fell short of expectations, prices of products such as fatty alcohols and sulfonated pharmaceuticals fluctuated greatly, raw material prices fluctuated, and the macroeconomic economy declined.