In the field of EOD, which is mainly made of lithium electric materials, it continues to make efforts and has a strong growth attribute. The company is the leading enterprise of ethylene oxide derivatives (EOD) in China, and the domestic market share of EOD polyether monomers in the field of building materials has exceeded 40%. In the future, we will benefit from the continuous extension from low value-added EOD materials in the field of building materials to high value-added lithium EOD materials and pharmaceutical-assisted EOD materials, and enjoy the "Davis double-click", which promotes the valuation center and accelerates the growth of performance. On the one hand, the company's investment in Yangzhou, Hainan and other places will further expand the company's EOD production capacity, and continue to extend to high value-added EOD fields such as lithium solvents and daily chemical surfactants; on the other hand, the 116500 tons of lithium materials project invested by Suzhou Huayi in Dalian is under intensive construction, which will contribute considerable income after completion.
Electrolyte additives are booming, and it is of great strategic significance to build an integrated industrial chain with Huayi. Lithium battery electrolyte additive VC has high self-polymerization, and the self-polymerization phenomenon will increase with the increase of equipment capacity, so its purity can not meet the requirements of lithium battery. As a result, the effective production capacity of the industry is far lower than the total production capacity, supply is tight, and prices continue to rise. Suzhou Huayi, which is a shareholder of the company, has profound R & D accumulation and rich technical reserves in the field of lithium materials. Huayi's 116500-ton lithium material project not only substantially increased the mainstream electrolyte additives VC and FEC, but also industrialized the high value-added additives such as lithium difluorophosphate, PS and low-cost lithium hexafluorophosphate technology that Huayi had stored in the past.
With the subsequent launch of electrolyte production capacity, Oak and Huayi will jointly realize the omni-directional layout of electrolyte materials: electrolytes, solvents and additives, which is of great strategic significance. And with high-quality customer resources, strong R & D strength, strong industrial background of lithium materials platform manufacturers Kanyi cooperation will lay a solid downstream foundation for the company.
Based on the subversive process to build the EC-CEC-VC/FEC lithium materials industry chain. The company announced in October 2020 that the annual production capacity of the EC/DMC lithium battery solvent project would reach 20, 000 tons. The core advantages of the company's lithium materials industry chain include: first, the current mainstream solvent production process uses propylene oxide as the main raw material. Under the current market price, it is extremely difficult for DMC manufacturers to make a profit if they match the production capacity of propylene oxide. The company uses ethylene oxide route to produce DMC, and the cost of raw materials is more than 50% lower than that of propylene oxide route; second, the industrial chain extends downward. Huayi's main product electrolyte additive VC/FEC uses Okeyang project product EC/DMC as raw material. The green process of carbonate solvents such as EC and DMC will become an important direction of the company in the future.
Investment suggestion: the company continues to enter the high-profit and high-valuation track from building materials to lithium materials and pharmaceutical auxiliary materials, and its profitability and growth will continue to improve. With the help of the high prosperity of new energy vehicles, the profitability of the company's lithium materials business continues to improve. We estimate that the company's operating income for 2021-2023 will be 69.13 pesos RMB 84.67 trillion RMB 11,099 million, respectively, and its net profit will be RMB 4.21 pm 6.38 / 1.061 billion RMB respectively, corresponding to 25.4 pm 16.7pm PE, respectively, maintaining a "buy" rating.
Risk hint: the growth rate of capital construction investment is lower than expected, the production expansion of superplasticizer polyether monomer is more than expected, and the expansion progress of DMC project is slower than expected.