Incidents:
On August 31, 2021, the official website of the State Administration of Market Supervision published China National Standards Notice No. 11 of 2021. The nine national standards revised by Dawn Co., Ltd. were approved and published, and will be officially implemented on March 1, 2022.
Key points of investment:
Participate in the formulation and revision of national standards to demonstrate the company's technical strength
As a high-tech enterprise certified by the country, the company has always attached importance to R&D investment and the improvement of its own technical strength, insisted on independent innovation and integration of industry, education and research, and entered the world competition stage with various products. At the same time, the company actively participated in the formulation and revision of various standards and trained a group of standardization experts. The company's 4 experts served as 5 members of the National Standardization Technical Committee. Up to now, the company has participated in the revision of 44 international, national, industry and group standards, demonstrating the company's technical strength and industry position in the field of standardization. The approval and publication of this new standard will not only further improve and improve the standard structure of testing methods in the field of materials in China, but also bring the new standard into line with international standards, remove trade barriers, facilitate product export trade, and push the company's international trade business to a new level.
Meltblown materials returned to normal. The company's 2021 H1 performance declined to 2021 H1. The company's performance declined, achieving revenue of 1,937 billion yuan, a decrease of 14.85% over the previous year; it achieved net profit of 110 million yuan, a decrease of 81.17% over the previous year. Among them, the company achieved revenue of 933 million yuan in Q2 2021 in a single quarter, a decrease of 71 million yuan over the previous quarter, and achieved net profit of 40 million yuan, a decrease of 30 million yuan over the previous quarter; Q2 2021 achieved gross profit of 107 million yuan in the single quarter, a decrease of 40 million yuan over the previous quarter, with a gross profit margin of 11.46%, a decrease of 3.19 percentage points from the previous quarter.
The company's performance declined year-on-year, mainly due to the sharp rise in volume and price of meltblown materials, which are epidemic prevention materials, in the first half of 2020, which gave the company a high performance base. With the effective control of the epidemic, meltblown products have returned to normal, causing both the company's revenue and profit to decline. Among them, the modified plastics sector, where meltblown materials was located, achieved revenue of 1,525 million yuan, -18.79% year on year, and gross profit of 186 million yuan, or -75.08% year on year; the thermoplastic elastomer sector achieved revenue of 185 million yuan, +1.54% year on year, and achieved gross profit of 42 million yuan, -57.25% year on year; the masterbatch sector achieved revenue of 133 million yuan, +43.44% year on year; and achieved gross profit of 119 million yuan, -13.52% year on year.
The net cash inflow from operating activities during the H1 reporting period in 2021 was -89 million yuan, a year-on-year decrease of 1,330 million yuan, or 107.19%. This was mainly due to a decrease in the company's advance receipts and higher disbursements during the reporting period compared to the same period last year. In 2021 H1, the company received 1,294 billion yuan in cash from selling goods and providing labor services, a decrease of 50.35% over the previous year.
Lay out the degradable plastics business to inject new impetus into the company's development
In order to respond positively to the country's green and low-carbon development requirements, the company signed a “Strategic Cooperation Framework Agreement” with the China Textile Research Institute on January 16, 2021, focusing on the field of degradable materials. At the same time, the company plans to invest in the construction of a biodegradable resin project with an annual output of 120,000 tons. The first phase includes a 60,000 tons/year PBAT plant and a THF recycling plant and supporting public works. The construction period of the project is 15 months, and it is expected that it will be put into operation in 2022. On June 5, 2021, the company announced its plan for the non-public issuance of A-shares in 2021. It plans to raise no more than 851 million yuan through the non-public offering of shares, of which 383 million yuan will be used for the construction of the first phase of the company's PBAT project, providing a strong financial guarantee for the development of the company's degradable materials business. With the construction and commissioning of relevant production capacity, the company's product structure will be further enriched, the company's competitiveness in the market will be enhanced, and new impetus will be injected into the company's development.
Establish a Russian production base and open up the international market
In order to improve the company's industrial layout and accelerate the international development process, on May 13, 2021, the company announced that its subsidiary Qingdao Haier New Materials plans to establish a joint venture with Russia's Indell Company to develop, produce and sell modified plastic products. Among them, Haier New Materials will invest 270 million rubles, accounting for 90%; Indell will invest 30 million rubles, accounting for 10%.
By establishing a production base in Russia, on the one hand, it is possible to develop the European market and improve the company's industrial layout; on the other hand, it also helps the company to better support Haier's Russian factory, a major downstream customer, and enhance the company's competitive advantage, thereby further improving the company's economic efficiency.
Profit forecast and investment rating: First coverage estimates that the company's net profit for 2021/22/23 is 281 million yuan, 365 million yuan, and 475 million yuan respectively (not considering the impact of the proposed increase on the company), corresponding to PE 22, 17, and 13 times, respectively, giving a “buy” rating.
Risk warning: Policy implementation situation, new capacity construction progress falls short of expectations, new capacity contribution performance falls short of expectations, changes in environmental protection policies, sharp economic decline, and development progress falls short of expectations.