[Haitong] Shilong Industry: a leading enterprise of fine chemical products

海通證券 ·  03/20/2015  · Researches

Main points:

Shilong Industry: a leader in fine chemical products.

The company is a comprehensive chemical enterprise mainly engaged in the production of fine chemical products, mainly engaged in the R & D, production and sales of chemical products such as AC foaming agent, thionyl chloride, chlor-alkali and so on. In 2014, these three products accounted for more than 88% of the main business revenue. The company is the second largest manufacturer of AC blowing agent and thionyl chloride in China, with high market share and brand awareness in China. During the reporting period, the company's sales of AC blowing agent were 52300 tons, 55300 tons and 58000 tons respectively, and the sales volume of thionyl chloride were 28000 tons, 33800 tons and 32800 tons respectively, ranking second in the industry in market share. The issuer as a whole is in the chemical raw material and chemical products manufacturing industry, and the upstream industries mainly include coal, raw salt, electricity, urea and other raw materials industries and energy industries, while the downstream industries mainly include shoe-making, tanning, building materials, pesticides, medicine, food additives, dyes, chemicals and other industries. The raw materials and energy prices of the upstream industries have a direct impact on the production costs of issuers. In recent years, AC foaming agent has been used in rubber-plastic thermal insulation materials, automobile interior decoration and other new environmental protection, energy-saving materials industry, and has a broad market prospect. Thionyl chloride is an important chemical intermediate, which has been used in food additive industry such as the preparation of sucralose and new energy industry such as lithium battery production.

The company's core competitive advantage. The company has mastered the production technology of improved AC foaming agent and sulfur dioxide full cycle method to produce high purity thionyl chloride, and has independent intellectual property rights, the company's production technology is in the leading level in China. In the AC blowing agent industry, the company has a certain dominance in market pricing by virtue of its leading market share and superior technical indicators. In the sulfoxide chloride industry, the company has become the demonstration and leader of production technology in the industry, and the total cycle method of sulfur dioxide production of high purity sulfoxide is at the advanced level in China. At the same time, the company advocates the development of circular economy, promote green environmental protection production, and gradually form an industrial chain based on chlor-alkali and fine chemical products such as AC foaming agent and thionyl chloride. Through the research and development of advanced cleaner production technology to achieve environmental protection standards, at the same time vigorously develop the comprehensive utilization of resources, and establish the competitiveness with circular economy as the core. The company currently has an annual production capacity of 60, 000 tons of AC foaming agent, 35000 tons of thionyl chloride and 290000 tons of caustic soda. With the further expansion of the production scale, the company will be able to more effectively save production costs, give better play to the advantage of economies of scale, and consolidate the competitive advantage of the industry. During the reporting period, the company organized technical personnel to implement a number of technical transformation projects, which effectively realized energy saving and emission reduction, reduced production costs and improved product yield and product quality, which laid a solid foundation for the establishment of the company's competitive advantage. Company ownership structure: the company's direct controlling shareholder is Jiangxi Dalong Industrial Co., Ltd., which directly holds 4, 5.0575 million shares of the company, accounting for 50.06% of the company's total share capital. The indirect controlling shareholder of the company is Jiangxi Dianhua Hi-Tech Co., Ltd., which directly holds 9.2 million shares of the company, accounting for 10.22% of the total share capital of the company; 4, 5.0575 million shares of the company are indirectly controlled by Dalong Industries, accounting for 50.06% of the total share capital of the company. Electric Hi-Tech controls a total of 5, 4.2575 million shares, accounting for 60.28% of the total share capital of the company. The registered capital of Tai long Industry is 8, 0 yuan, and the registered capital of electrified Hi-Tech is 6, 9.7 million yuan. Audio-chemical Hi-Tech holds a 93.875% stake in Dalong Industry., Is the controlling shareholder of Tai long Industry. At present, audio-chemical Hi-Tech and Dalong Industries are not engaged in specific business. The company's indirect controlling shareholder electrified high-tech shares are scattered, there is no actual controller, therefore, Shilong has no actual controller.

The scale and direction of the funds raised.

The company's investment projects mainly include four projects: annual output of 50, 000 tons of AC blowing agent and its supporting facilities, technical renovation and expansion project of thionyl chloride, repayment of bank loans and replenishment of working capital. The total investment is about 488 million yuan, and it is planned to raise 404 million yuan. The fund-raising investment project is a technical transformation and expansion project, which is mainly used to expand the production capacity of existing products, enrich the variety of products and upgrade existing production facilities. After the completion of this investment project, the company will increase the production capacity of AC foaming agent and sulfoxide chloride by 50, 000 tons / year and 20, 000 tons / year, further expand the production scale, optimize the company's product structure and improve profitability. At the same time, reduce the company's financial expenses, supplement liquidity to enhance market competitiveness.

Profit Forecast and Investment rating

We estimate that the company's 2015-2017EPS is 0.83,0.96,1.06 yuan respectively (post-issue equity). With reference to the valuation of the A-share new material plate company, we think that it is more reasonable to give the company 45 times the dynamic PE in 2015, corresponding to the company valuation of 37 yuan, giving the company the investment rating of "increasing its holdings" for the first time.

Risk hints: (1) the risk of new market development is lower than expected; (2) the risk of demand decline in optical fiber and cable industry.

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