Main points of investment:
In 2014, the quarterly results were in line with expectations, maintaining the "overweight" rating and maintaining the target price of 10.45 yuan. The company's operating income and net profit in the first quarter of 2014 were 123 million yuan and 2.106 million yuan respectively, an increase of-1.87% and 192% respectively over the same period last year. The net profit after deducting non-return was-390%, which was in line with expectations. The sharp decline in post-deduction results is due to the huge negative impact of the company's high prices of raw materials in the first two months of 2014, which in fact improved significantly compared with the fourth quarter of 2013 (operating profit increased by 78%). With the weakening of the impact of the company's high-priced raw materials, the improvement of the profitability of the structural foam business and the rapid development of the post-processing business, the company's performance improvement will continue. We maintain the 2014-2016 profit forecast EPS of 0.18 yuan / 0.25 yuan / 0.32 yuan respectively (considering the acquisition of Xinguang Environmental Protection is 0.19 yuan / 0.28 yuan / 0.34 yuan respectively), maintain the target price of 10.45 yuan unchanged, maintain the "overweight" rating.
The profitability of structural foam materials has been continuously strengthened. At present, the business has improved significantly in the following two areas: lower costs and higher sales. In terms of cost, the loss caused by high-priced light wood has reduced since March, and the cost of raw materials has gradually returned to the normal level since the second quarter; in terms of sales, the operating rate of 7000 tons of structural foam materials has gradually increased from 70% to 80%. Sales have also increased. In addition, downstream wind power enterprises are about to get new orders one after another, which may lead to the rise of structural foam prices under the background of substantial improvement in supply and demand in the structural foam industry and low profits.
The growth rate of post-processing field is obviously accelerated, or it will far exceed market expectations. After 2013, the processing sector achieved 43% revenue growth, and in 2014, the company concentrated on at least four product lines of post-processing. Judging from the sales in the first quarter, post-processing is expected to double its revenue for the whole year in 2014. Or it will far exceed market expectations (the previous market expectations were 50-80%).
Risk hint: the sales price of structural foam materials is lower than expected; the gross profit margin of post-processed products decreases.