Event

On April 14, 2021, the company issued a forecast for the first quarter of 2021: Q1 achieved a net profit of 3.0-320 million yuan in 2021, an increase of 547.3% 590.5% over the same period last year.

Brief comment

The high boom in the spandex industry helped the company's performance soar in the first quarter. In 2021, Q1 Company realized a net profit of 3.0-320 million yuan, an increase of 547.3% 590.5% over the same period last year. The company's 2021Q1 performance soared mainly due to the high prosperity of the company's main product spandex fiber. From the price of spandex: the price of 2021Q1 spandex 40D is 51177 yuan / ton, the price difference is 24285 yuan / ton, up 73.7% and 8881 yuan / ton compared with the same period last year, and 41.4% and 6081 yuan / ton compared with the same period last year. The price of 2021Q1 spandex 20D was 63652 yuan per ton, with a price difference of 36759 yuan per ton, up 76.8 percent and 14823 yuan per ton over the same period last year, and 50.6 yuan and 12467 yuan per ton compared with the previous month.

The company's spandex products are mainly 20D, 30D, 40D, of which spandex 20D accounts for more than 30%, is the largest spandex 20D manufacturer in China, spandex 40D accounts for about 40%. The price difference of spandex 20D is significantly higher than that of 40D. As the largest spandex 20D manufacturer in China, the benefit degree is higher than the industry average. In terms of spandex sales, the company's sales increased significantly in the first quarter of 2021. From the company's spandex raw material cost point of view: spandex raw materials are mainly PTMEG and pure MDI, in which the PTMEG market is in a state of balance between supply and demand, but with the introduction of the "plastic restriction order" in 2020, the demand for BDO has increased significantly, the price of BDO has risen sharply, driving the price of PTMEG to rise, while the price of MDI has also risen to varying degrees, at the same time, the company pays close attention to raw material prices, strengthen cost control, and effectively deal with raw material price fluctuations. In terms of production cost:

Xinxiang Chemical Fiber has adopted the fourth-generation spandex production technology developed by Zhengzhou COSCO and currently leading in the industry among the 100000 tons of new production capacity after 2014. Compared with the third generation technology, the comprehensive energy consumption of this technology has been reduced by about 34%. The recovery and utilization rate of DMAC has increased from less than 97% to more than 99%, and the discharge of waste liquid has been reduced by about 70% compared with the third generation. In the 40,000-ton ultra-fine denier spandex second-phase project, which was put into production in 2019, Cosco's more advanced fifth-generation technology was adopted, the number of spinning heads reached 240 (3 × 80), and the production cost was further reduced, which is 2000-3000 yuan / ton lower than that of domestic small production capacity. Generally speaking: with the continuous rise of spandex price end, the effective control of spandex cost side helps Xinxiang chemical fiber spandex business gross profit margin to rise sharply, spandex price, sales and gross profit margin boost the company's performance in the first quarter.

Spandex industry to maintain a high boom, the company's performance in 2021 is expected. Upstream cost support, strong downstream demand, spandex prices and price differences are easy to rise and difficult to fall under the dual drive of raw material costs and demand. In 2021, only Huafeng Chemical has a production capacity of 40,000 tons. It is expected that the spandex industry will continue the seller's market pattern in 2021. Xinxiang chemical fiber as a leader in the spandex industry, spandex production capacity increased steadily from 20, 000 tons to 120000 tons. After "returning to the city and entering the park", the company relocated 20, 000 tons of old production capacity in Fengquan District, Xinxiang, with a total compensation of 1.35 billion yuan. the production capacity of 100000 tons is the new production capacity after 2015, accounting for about 11% of the national production capacity. The first phase of Xinxiang chemical fiber "annual output of 100000 tons of high-quality ultra-fine denier spandex fiber project" is expected to be put into operation by the end of 2021; the second phase of 30,000 tons will be put into production in the fourth quarter of 2022, when the company's spandex production capacity will reach 160000 tons. Under the high prosperity of the spandex industry, the company's performance in 2021 can be expected.

The production capacity of viscose filament is the first in the world and the gross profit margin is the leading industry. The national production capacity of viscose filament is 200000 tons. After the withdrawal of Jiujiang chemical fiber, there are only 4 production enterprises and the CR3 is more than 90%. Xinxiang chemical fiber viscose filament has a production capacity of 80,000 tons, with a market share of 38%, ranking first in the world. Xinxiang chemical fiber continuous spinning process capacity accounts for 71.4%, the domestic average level is only 42.9%. Advanced production technology helps the company to lead the industry in the gross profit margin of viscose filament products. From 2009 to 2020, the company's average gross profit margin of viscose filament is 16.3%, which is much higher than that of other companies in the same industry. Since June 2020, with the gradual improvement of the overseas epidemic, the export volume has returned to the pre-epidemic level. In 2021, the overall domestic consumer market is stable, the dark period of viscose filament market has passed, and the price of viscose filament, which is still low, is expected to pick up, driving the company's performance growth in 2021.

Profit forecast and valuation: the return net profit of the company in 2021, 2022 and 2023 is 1.047 billion yuan, 1.093 billion yuan and 1.13 billion yuan respectively, the EPS is 0.83,0.87 yuan and 0.90 yuan respectively, and the PE is 5.3X, 5.0X and 4.9x respectively. Maintain the target price of 8.7 yuan per share and maintain the "buy" rating.

Risk hint: the production of the project is not as expected and the demand is not as expected.