Event

The company released a semi-annual report for 2021: the company's 2021H1 realized revenue of 4.12 billion yuan, an increase of 124% over the same period last year, and its net profit was 740 million yuan, an increase of 2491% over the same period last year; of which 2021Q1 company realized revenue of 1.95 billion yuan and net profit of 310 million yuan; 2021Q2 realized revenue of 2.16 billion yuan and net profit of 430 million yuan.

Brief comment

Spandex boom, H1 performance soared. The company's 2021H1 realized revenue of 4.12 billion yuan, an increase of 124% over the same period last year, and its net profit was 740 million yuan, an increase of 2491% over the same period last year. Among them, 2021Q1 company realized revenue of 1.95 billion yuan and net profit of 310 million yuan, while 2021Q2 realized revenue of 2.16 billion yuan and net profit of 430 million yuan. The overall gross profit margin of 2021H1 products was 33.99%, an increase of 16.07% over the same period last year, including spandex revenue of 3.06 billion yuan, accounting for 74.3%, gross profit of 1.25 billion yuan, gross profit of 40.97%, an increase of 27% over the same period last year; viscose filament revenue of 900 million yuan, accounting for 21.9% of revenue, gross profit of 120 million yuan, gross profit of 12.97%, a decrease of 10.53% over the same period last year. The main reason for the sharp rise in the company's 2021H1 performance is the high industry prosperity of the main spandex products. From the perspective of spandex prices: the average market prices of 2021H1 spandex 40D and 20D are 58197 yuan / ton and 74555 yuan / ton respectively, an increase of 99.2% and 104.7% respectively over the same period last year. 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. From 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. The price difference of spandex 20D is significantly higher than that of spandex 40D. as the largest spandex 20D manufacturer in China, the performance elasticity of spandex is higher and the benefit degree is significantly higher than the industry average. At the same time, the first phase of the "high-quality ultra-fine denier spandex fiber project with an annual output of 100000 tons" will increase the annual production capacity of 15000 tons of 15D spandex and 15000 tons of 20D spandex after 2021Q4 is put into production, and the proportion of ultra-fine denier capacity will be further increased, further thickening the company's profitability. In terms of production costs, Xinxiang chemical fiber will add 100000 tons of production capacity after 2014. All adopt the fourth generation spandex production technology developed by Zhengzhou COSCO and currently leading in the industry, and the production cost is 2000-3000 yuan / ton lower than the domestic small production capacity.

Spandex industry continues to rise, and the performance is expected in 2021. From the perspective of spandex industry, on the supply side, the total effective production capacity of spandex in 2020 is 890000 tons, and the capacity utilization rate is about 85%. Many backward small-scale production capacity has been shut down or on the verge of shutting down. CR5 has risen from 45% in 2014 to 67% now, 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, 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, it is expected that there will be a broad market space 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. From the perspective of the company's spandex business, Xinxiang chemical fiber, as a leader in the spandex industry, has a production capacity of 100000 tons, accounting for about 11% of the national production capacity. Xinxiang chemical fiber "annual output of 100000 tons of high-quality ultra-fine denier spandex fiber project" the first phase of 30,000 tons capacity is expected to be put into operation by the end of 2021. The second phase of 30,000 tons of production capacity will be put into production in the fourth quarter of 2022, when the company's spandex production capacity will reach 160000 tons, at the same time, the company's fine denier filament proportion will be further increased, and the spandex differential layout will be further improved. benefiting from the high prosperity of the spandex industry and the company's high fine denier spandex ratio, the company's profit center in 2021 will be on the next level.

The production capacity of viscose filament is the first in the world and the gross profit margin is the leading industry. The national viscose filament production capacity is about 210000 tons, and Xinxiang chemical fiber viscose filament production capacity is 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's viscose filament products leading the gross profit margin industry. The proportion of direct and indirect exports of the company's viscose filament has reached 70% and 80%. With the gradual improvement of the overseas epidemic situation, the profit level of the company's viscose filament business is expected to usher in an inflection point.

Profit forecast and valuation: the company's net profit in 2021, 2022 and 2023 is expected to be 14.9,12.6 and 1.58 billion yuan respectively, EPS 1.01,0.86 and 1.08 yuan respectively, and PE 7.5x, 8.8x and 7.0x respectively, maintaining the "buy" rating.

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