Domestic and international leader

Sichuan North Nitrocellulose Co., Ltd. (hereinafter referred to as "Beihua Co., Ltd.") is an indirect holding enterprise of the Arms Industry Group and the largest nitrocellulose production enterprise in the world. The company takes Luzhou as the main production base (the single-line scale is the first in the world). After integrating the nitrocellulose production capacity of Xi'an Hui'an and Jiangxi Luqing, the total production and marketing scale of the global nitrocellulose industry surpassed France's SNPE in 2004, ranking first in the world. In 2006, the international market share reached 17.68%. In 2007, the domestic market share was 42.60%. It is a leading enterprise in domestic and international nitrocellulose industry.

Downstream demand is gradually stabilizing and warming up.

Because nitrocellulose has excellent properties such as quick drying, strong adhesion, good repairability and retaining the natural texture of wood, it is widely used in the production of wood paint. The development of wood paint industry is closely related to the furniture industry. Due to the influence of the economic crisis, China's furniture production has declined. Since February 2009, China's furniture production has rebounded, and the monthly output has increased slightly compared with the same period last year. Among them, the sales income of wooden furniture reached 65.65 billion yuan from January to May, an increase of 11% over the same period last year. With the gradual weakening of the impact of the economic crisis and the gradual improvement of the economy at home and abroad, we expect China's furniture exports to pick up gradually from the second half of the year. Sales of nitrocellulose are expected to rise in the second half of the year.

Prediction and valuation

As a leading nitrocellulose enterprise, the company has many advantages in technology, scale and cost, and has strong competitiveness in domestic and foreign markets; the construction of fund-raising projects will enable the company to develop steadily in the future and further improve its competitiveness with international enterprises. However, due to the impact of the financial crisis, export and domestic downstream demand will be reduced, and the fund-raising projects will be put into production in the middle and late 2010. We expect the company's earnings per share in 2009 and 10 years to be 0.11 yuan and 0.17 yuan respectively. Due to the uncertainty of asset injection expectations and the company's current relatively high stock price, it is given a neutral rating.