Based on flame retardants and flame retardant plastics, expand the business of phosphorus chemical industry and recyclable materials. The company was founded in June 2007 and listed in Science and Technology Innovation Board in January 2021. the traditional main business includes halogen-free flame retardants, modified plastic particles and products. Now it has formed an integrated industry chain management model of "modified plastic auxiliaries (flame retardants) + modified plastic particles + modified plastic products". At the same time, the company extends to the field of phosphorus chemical industry and recyclable materials by acquiring upstream raw material supporting business and expanding its own business field.
Traditional flame retardant business is under short-term pressure, and profitability is expected to pick up in the future. In 2021, due to the production restriction of phosphorus chemical industry, the price of phosphorus series raw materials in the upstream of the company rose sharply. In addition, the increase in overseas freight also increased the cost of importing raw materials such as bromide, which put pressure on the company's short-term performance. Looking forward to 2022 and the future, the order of the company's product growth association is expected to be re-signed, the cost pressure is gradually transmitted downstream, the cost of raw materials is gradually adjusted and the production capacity is increased. The profitability and overall performance of the company's traditional flame retardant and flame retardant plastic particles / products business are expected to improve.
Investment in the construction of EPP incubator project, circular economy policy to promote a lot of room for development. Foamed polypropylene (EPP) is a new type of non-toxic, pollution-free, recyclable and degradable material. Its performance is better than that of existing foamed materials, such as foamed polystyrene (EPS), foamed polypropylene (EPE) and so on. With the rapid development of China's express material market, recyclable express materials are supported by policies under the pressure of environmental protection, and the development prospect is good. According to estimates, in the fresh transportation scene, the demand for EPP recycling boxes may be hundreds of millions. The recyclable incubator made of EPP material can be used in cold chain and fresh transportation industry. The company actively integrates into the industrial chain of circular economy, broadens the downstream application of EPP, and improves profitability.
Acquire Longhua Chemical layout polyphosphoric acid and cut into the lithium new energy supply chain. On September 16, 2021, the company acquired a 59.06% stake in Anhui Longhua Chemical Co., Ltd. (referred to as "Longhua Chemical") with its own capital of 75.222 million yuan. Longhua Chemical is an important supplier of flame retardant raw materials, the company through the acquisition of Longhua Chemical, vertical integration of the industrial chain, will further reduce production costs. In addition, polyphosphoric acid produced by Longhua Chemical is an important raw material for the production of liquid lithium hexafluorophosphate. At present, Longhua Chemical has a production capacity of 16,000 tons of phosphorus pentoxide and 26,000 tons of polyphosphoric acid per year, and another 100000 tons of polyphosphoric acid and 20,000 tons of phosphorus pentoxide are under construction. Benefiting from the strong demand for new energy, Longhua Chemical's polyphosphoric acid capacity is expected to bring greater performance increment after the release.
Profit forecast, valuation and rating: as the business model of the company's EPP recycled packaging materials business and the corresponding capacity scale have not been disclosed, without taking into account the performance contribution of EPP recyclable packaging materials business, we expect the company's 2021-2023 net profit to be 1.03,2.48,362 million yuan respectively, corresponding to EPS 1.10,2.65,3.87 yuan per share. We give the company about 20 times PE in 2022, corresponding to the target price of 53.00 yuan, covering the company for the first time and giving the company a "buy" rating.
Risk hint: the project construction progress is not as expected, the raw material price fluctuates, and the downstream demand is lower than the expected risk.
