Incidents:
On November 16, the company issued the “Notice Concerning the Sale of Assets by Wholly Owned Subsidiaries”: The company's wholly-owned subsidiary Sinochem International (OVERSEAS) PTE LTD (SINOCHEM INTERNATIONAL (OVERSEAS) PTE LTD, hereinafter “Sinochem New”) intends to transfer its holdings to Hainan Natural Rubber Industry Group Co., Ltd. (hereinafter referred to as “Hainan Rubber”) through a non-public agreement transfer agreement (hereinafter referred to as “Hesheng”) (“Company”) has 574,204,299 common shares, and the underlying asset's transaction price is determined to be $180,874,354.19. Sinochem New plans to sell 36.00% of Hesheng's shares to Hainan Rubber in cash at a price of 0.315 US dollars/share. After the above sale is completed, Sinochem will hold 29.2% of Hesheng's shares. After the transaction was completed, the scope of the company's consolidated statement changed, and Hesheng Company was no longer a subsidiary within the scope of the consolidated statement.
Key points of investment:
The company's natural rubber business has a large revenue scale, and is expected to achieve a win-win deal with Hainan Rubber. Hesheng is a Singapore-listed company founded in 2010 with a registered capital of 953 million Singapore dollars. It is mainly engaged in the cultivation, processing, marketing and export of natural rubber. The company completed the acquisition of Hesheng's shares on August 22, 2016, and holds 54.99% of its shares. The company's natural rubber business covers the entire natural rubber industry chain from planting, production and processing to trade and distribution. The global market share has exceeded 12% and is in a leading position in the world. The natural rubber business contributes a large revenue scale to the company, but due to multiple factors such as the long-term downturn in the natural rubber market and the epidemic, the company's natural rubber business operations are under pressure. Overall, the company's natural rubber business has a complete industrial chain and a large market share and scale effect. It has a high market position and comprehensive strength in the natural rubber field, but it is not in line with the company's core strategic direction of focusing on the new chemical materials industry. There is no synergy with the existing industrial chain. The large revenue scale causes the company's main business to be unclear and also increases the pressure on the company's operation and management. After the transaction, it will help the company gather resources and further invest in the new chemical materials industry. For trading partners, after the transaction is completed, Hainan Rubber will quickly obtain overseas processing capacity for natural rubber and latex, which will help further enhance the voice and influence of natural rubber in the international market. At the same time, Hainan Rubber will obtain downstream customer resources from Hesheng Company and use Hesheng's European and American trade network to further enter global natural rubber trade and expand the scale of natural rubber trade business. Furthermore, Hainan Rubber will obtain natural rubber plantations from Hesheng Company in emerging natural rubber production areas such as Cameroon and Côte d'Ivoire to strengthen the allocation of international planting resources.
Natural rubber was announced, and the company further focused on new chemical materials
As the core investment platform for China's Sinochem materials science industry, the company will continue to increase capital and R&D investment in the future to build a new chemical materials cluster centered on the Lianyungang Integrated Circular Economy Industrial Park. The company will continue to focus on the new chemical materials industry, building a key industrial chain as the core, continuously extending, repairing and strengthening the chain, gradually forming multiple industrial chains with leading international or domestic positions, further enhancing its outstanding competitive advantage in core industrial chains such as epoxy resin, polymer additives, aramid, ABS, nylon 66, etc., and creating an industrial base pattern with Lianyungang base as the core and collaborative development of “1+N” multiple bases, which strongly supports the construction of the industrial chain. At present, the company has a deep industrial base and the prototype of a leading new chemical materials enterprise, laying a good foundation for the company's future development. A number of key projects have been completed and put into operation one after another, which will provide the company with more growth and performance growth.
The sale of Hesheng's shares will launch the natural rubber business and further increase the revenue share of the new chemical materials industry. Although the company's revenue has been reduced by more than 10 billion dollars, its main business has become more clear, and the texture of new chemical materials is more pure. At the same time, the company will also receive more than 1 billion yuan (181 million US dollars) of asset sales revenue this time to help with the construction of new chemical materials-related projects. With the gradual implementation of major projects such as C3 and accelerators in Lianyungang, the company's transformation into new chemical materials continues to deepen. At the same time, the company has made breakthroughs and continues to expand in aramid, nylon 66, etc., and the company will continue to advance towards a leading new chemical materials enterprise.
Profit forecasting and investment ratings are based on the principle of prudence. The current profit forecast does not take into account the impact of proposed sales matters on the company's performance. We expect the company's net profit of 2022-2024 to be 1,620, 21.75, and 2,953 billion yuan respectively. Corresponding to PE is 12.00, 8.93, and 6.58 times, respectively, maintaining the “buy” rating.
Risks suggest that there is still uncertainty about asset sales, project commissioning progress falling short of expectations, large fluctuations in raw material prices, sharp declines in chemical prices, force majeure such as domestic and foreign epidemics, turbulence in the international situation, and drastic changes in industry policies.