The annual net profit of homecoming increased by 44% compared with the same period last year, maintaining the "overweight" rating.
Chenghua shares released its 2020 annual report on April 24, with annual revenue of 900 million yuan, an increase of 11.8 percent over the same period last year, and a net profit of 137 million yuan, an increase of 44.0 percent over the same period last year. The performance was slightly lower than expected (147 million yuan). Of this total, 2020Q4 realized revenue of 281 million yuan, an increase of 36.3% over the same period last year, and a net profit of 41 million yuan, an increase of 47.7% over the same period last year. The company also released its quarterly report for 2021. 2021Q1 achieved revenue of 305 million yuan, an increase of 81.9% over the same period last year, and a net profit of 50 million yuan, an increase of 154.8% over the same period last year. The company plans to pay 4 yuan (including tax) dividend to increase 4 shares. We estimate that the EPS for 2021-2023 will be 1.39 USD 1.79 USD 2.32 respectively, maintaining the "overweight" rating.
The improvement of table activity and flame retardant business has promoted the increase of gross profit margin, and the investment in research and development has continued to rise. according to the company's annual report, the comprehensive gross profit margin increased by 2.8pct to 28.8% year on year in 2020, mainly due to the higher price of polyetheramine under the background of wind power rush installation and the price increase caused by tight supply and demand in the flame retardant industry. The revenue of the surfactant business reached 583 million yuan, an increase of 15.9% over the same period last year, and the gross profit margin increased to 30.9%; the revenue of the flame retardant business reached 208 million yuan, an increase of 13.5% over the same period last year; the gross profit margin increased to 26.7%; and the revenue of the silicone rubber business reached 105 million yuan, down 6.3% from the same period last year, and the gross profit margin decreased by 1.0pct to 19.3%. The rate of management / finance / R & D expenses of the company changed from 1.3/0.3/0.3pct to 7.3%, 0.2% and 3.3%, respectively, and the rate of sales expenses decreased by 3.1pct to 3.6% compared with the same period last year. This is mainly due to the implementation of the new revenue criteria and the transfer of sales freight to the operating cost project.
According to the company's announcement, the big increase in 21Q1 performance is mainly due to the continuous growth of product sales and business scale of the company and subsidiaries during the reporting period, but due to transportation expenses including operating costs and raw materials rising 21Q1 gross profit margin fell 2.4pct to 26.4% year-on-year, the company's R & D expenses increased by 89.2% year-on-year. As of the end of Q1, the company has 26 projects in progress. It is mainly used to optimize the process and technology of existing products and develop new products, so as to increase the company's new profit growth point in the future. According to the company's annual report, the start-up rate of the flame retardant project that was put into production in 2020 has increased. Huaian Chenghua's 5000-ton amino polyether project will be launched at the end of 2021Q2, and the new project will continue to contribute to the company's performance growth.
Maintain the "overweight" rating
Considering that the supply and demand of the company's polyetheramine and flame retardant products is still tight, we raise the company's EPS forecast in 2021-2022 to 1.39max 1.79 yuan (the previous value 1.33max 1.65 yuan), and introduce the 2023 EPS forecast of 2.32 yuan, combined with the comparable company valuation level (2021 Wind consensus expectation average 15 times PE), to the company 2021 15 times PE, corresponding target price 20.85 yuan (the previous value 23.94 yuan), maintain the "overweight" rating.
Risk hint: the risk of substantial fluctuations in raw material prices and the risk that the production schedule of the new project is not up to the expected risk.
