An overview of events. On August 1, 2023, the company announced that it planned to implement the Vietnam (Phase I) project with an annual output of 18000 tons of high-performance tire cord fabric. This project is the expansion project of the company's production base in Vietnam. It is planned to build a new twisting workshop, weaving workshop, dipping workshop, warehouse and other structures with an area of 56380 square meters, and purchase production equipment such as twisting machines, looms and dipping machines. And related supporting equipment, warehouses, supporting roles and water treatment, AC and power distribution, refrigeration, heating and other public works equipment.
The expansion project is a further layout of the company's plant in Vietnam. In 2020, the company considered and approved the proposal to implement the project of annual production of 110000 tons of differential polyester industrial filament (phase I) in Vietnam; from 2018 to 2021, the project was put into production of 12000 tons (August 2020), 25000 tons (October 2020) and 42000 tons (March 2021), respectively, with a production capacity of 79000 tons by the end of 2021. In June 2023, the remaining 31000 tons of the project will be put into production and 110000 tons will be fully released. The company's polyester cord fabric products are made of high modulus and low shrinkage filament. The first phase of the cord fabric project is expected to fully learn from the experience of the former industrial silk project, and may benefit from the industrial silk raw materials of the previous project. The company's industrial chain layout in Vietnam is expected to be further extended.
The expansion project is a supplement to the company's domestic cord production line. The company is a professional manufacturer of tire cord fabric. At present, the company has an annual production capacity of 60,000 tons of tire cord fabric, with a total of 4 production lines, of which the fourth production line has completed installation, commissioning and trial production at the end of 2022. The construction of Vietnam cord fabric can rely on the company's professional technology, management personnel reserve and cord fabric industry advantages, and has a relatively sufficient guarantee in management, technology and market.
The long-term benefits of the "Vietnam factory" can be gradually realized. The downstream of cord fabric is mainly concentrated in the tire field, and the regional investment in Vietnam opens up long-term space for the company's international layout: on the one hand, Vietnam has the advantage of factor cost, which helps to enhance the scale and strength of the company in the field of high-end chemical fiber. On the other hand, Vietnam has the advantage of customer resources, according to Tire World Network, Princeton, Michelin, Zhengxin, Racing Wheel and other tire manufacturers have set up factories in Vietnam, with a total of 830 Vietnamese tire enterprises by 2021. We believe that Hailide Vietnam Cord fabric Phase I project is expected to fully benefit Vietnamese tire customer resources, at the same time, Vietnam's export barriers to Europe and the United States are relatively loose compared with China. The layout of the project will enable the company to achieve global capacity optimization and adjustment, and its performance capacity is expected to be gradually enhanced in the future.
Investment suggestion: the company's polyester industrial filament and cord fabric are positioned in the automotive differentiated high-end market, and there is more room for the development of new photovoltaic reflective film products. Taking into account the capacity release of the new Vietnam base project, we estimate that the company's homing net profit for 2023-2025 will be RMB 466, 602 million, respectively, corresponding to a PE multiple of 14x/11x/10x on August 1, maintaining a "recommended" rating.
Risk tips: project production is not as expected, industry competition intensified, trade frictions intensified.