Event

The company issued a half-year performance forecast for 2021: the company's 2021H1 is expected to achieve a net profit of 7.1-760 million yuan, an increase of 2394%, 2570%, 2021Q2, and a month-on-month increase of 29%, 45%.

Brief comment

Spandex industry continued to rise, high spandex performance flexibility helped H1 performance soar.

The 2021H1 of the company realized a net profit of 7.1-760 million yuan, an increase of 2394%, 2570% and 2021Q2 over the same period last year, and a month-on-month increase of 29%, 45%, and a net profit of 4.0-450 million yuan. The provision for bad debts of receivables in the first half of 2021 is 5.87 million yuan, and the provision for inventory depreciation is 10.64 million yuan. The total profit of the company in the first half of 2021 is reduced by 4.4343 million yuan. From the company's spandex sales point of view, the company's 2021H1 sales increased significantly. Judging from the price of spandex:

The average market price of 2021H1 spandex 40D and 20D is 58197 yuan / ton and 74555 yuan / ton respectively, with a year-on-year increase of 99.2% and 104.7%. The price difference between spandex 40D and 20D is 27285 yuan / ton and 43643 yuan / ton, respectively, compared with the same period last year. + 11803 yuan / ton, + 20951 yuan / ton.

The average market price of 2021Q1 spandex 40D was 51177 yuan per ton, with a price difference of 24285 yuan per ton, up 41.4 percent and 6081 yuan per ton from the previous month. The average market price of 2021Q1 spandex 20D was 63652 yuan / ton, with a price difference of 36759 yuan / ton, up 50.6% and 12467 yuan / ton from the previous month. The average market price of 2021Q2 spandex 40D was 65299 yuan / ton, with a price difference of 30273 yuan / ton, up 27.6% and 5988 yuan / ton from the previous month. The average market price of 2021Q2 spandex 20D was 85605 yuan / ton, with a price difference of 50578 yuan / ton, up 34.5% and 13819 yuan / ton from the previous month. Spandex inventory level is about 14 days, which is the lowest level in nearly four years. From the point of view of the company's spandex product structure: the company's spandex products are mainly 20D, 30D, 40D, of which spandex 20D accounts for more than 30%, is the largest spandex 20D production enterprise 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 performance elasticity of spandex is higher and the benefit degree is higher than the industry average.

From the production cost point of view: Xinxiang chemical fiber after 2014 in the new 100000 tons of production capacity, all the use of Zhengzhou Cosco research and development, the current industry-leading fourth-generation spandex production technology. Compared with the third generation technology, the comprehensive energy consumption of this technology is reduced by about 34%, and the production cost is 2000-3000 yuan / ton lower than the small domestic production capacity. Overall: 2021H1 is affected by the continuous growth of the basic demand of the spandex industry, the sales price of the company's main products spandex fiber has increased significantly over the same period last year, the sales volume has increased significantly, and the gross profit margin of spandex business has increased significantly, resulting in a substantial increase in the company's semi-annual performance and the same period Spandex industry continues to rise, and the company's performance is expected in 2021. On the supply side, in 2020, the total effective production capacity of spandex in China reached 890000 tons, and the capacity utilization rate was about 85%. Many backward small-scale production capacity has been shut down or on the verge of closure. CR5 has risen from 45% in 2014 to 67% at present. The industry reshuffle has been further intensified, the industry concentration has been further enhanced, and the profitability has been further improved. The new production capacity from 2021 to 2022 is also concentrated in a few leading enterprises, such as Huafeng Chemical, Korea Xiaoxing, Xinxiang Chemical Fiber, Taihe New Materials and so on. On the demand side, the domestic apparent consumption of spandex in 2020 was 670000 tons, an increase of 3.2% over the same period last year. With the continuous improvement of the national economic level, the demand for high-grade fabrics is also increasing. In recent years, sports elastic fabrics are growing rapidly, the application field of spandex is expanding, and the spandex content of fabric is increasing, which further stimulate the market demand. With the continuous improvement of the penetration of spandex in textile products and the change of people's healthy living habits, it is expected that there will be a broad market space in the future. In addition, spandex has a broad potential for differential development. at present, it accounts for relatively small application in medical, automobile interior and other industrial fields, and there is a huge space for growth in the future. Considering that the future spandex demand has a steady growth rate of 6% Murray 10%, and the spandex supply is orderly, the spandex industry is expected to remain strong 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 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 profit center will go up again in 2021.

The production capacity of viscose filament is the first in the world and the gross profit margin is the leading industry. National viscose filament production capacity of 200000 tons, Xinxiang chemical fiber viscose filament production capacity of 80,000 tons, market share of 38%, the world's largest production capacity. 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's viscose filament products leading the gross profit margin industry. The total proportion of direct and indirect exports of viscose filament reached 70% Mel 80%. With the gradual improvement of the overseas epidemic situation, the export volume has returned to the pre-epidemic level, the dark period of the viscose filament market has passed, and the inflection point of the industry is even. The company's viscose filament performance growth is expected.

Profit forecast and valuation: the company's net profit forecast for 2021, 2022 and 2023 is 14.9,12.6 and 1.58 billion yuan respectively (the previous value is 10.5,10.9 and 1.13 billion yuan respectively), the EPS is 1.01,0.86 and 1.08 yuan respectively (the previous value is 0.83,0.87 and 0.90 yuan respectively), and the PE is 7.9x, 9.4x and 7.5x respectively, maintaining the "buy" rating.

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