Viscose is the main business, and Nanjing chemical fiber performance improvement is expected.
Nanjing Chemical Fiber is a listed company controlled by Nanjing SASAC. The company's main business is viscose fiber, accounting for 84.06% of business revenue. With the rebound of the viscose industry, the company's market capitalization is small, the performance elasticity is large, the price of viscose staple fiber increases by 1000 yuan, and the company's EPS thickens by 0.32 yuan.
Cotton price enters the rising cycle, viscose ushered in a reversal of the economy.
Cotton prices have been adjusted continuously for five years, and the supply has shrunk sharply. Since 2011, global cotton production has been reduced by 24%, while China's cotton production has been reduced by 38%. Excluding Chinese inventories, global inventories are historically low. Although Chinese inventories are high, there is little pressure to sell them. Cotton planting cost rigidity rose, supporting cotton prices into the upward cycle, 16-year cotton prices rose from 12000 yuan / ton to more than 15000 yuan / ton. The viscose industry has suffered losses for many years, capacity growth has slowed down, demand is growing rapidly, and the industry operating rate of 86% has reached a high level in 2016. The recent off-season price increase of more than 1000 yuan / ton, inventory in recent 4 years the lowest, the price difference increased significantly from 5000 / ton at the beginning of 16 years to 8000 yuan / ton at the beginning of 17 years. In view of the fact that new production capacity is still limited in the next two years, we believe that the viscose industry will continue to improve.
The expectation of the reform of state-owned enterprises is strong, and the space for tapping the internal potential is huge.
The controlling shareholder of Nanjing Chemical Fiber is Xingong Group, which is subordinate to Nanjing SASAC, with a shareholding ratio of 41.45%. The other two listed companies of Xingong Group have started the reform of state-owned enterprises, and the reform of chemical fiber state-owned enterprises in Nanjing is expected to be strong. The interest rate of viscose short cilia of the company is lower than that of comparable listed companies, and the gross profit rate of viscose filament is also significantly lower than that of comparable listed companies. We believe that after the reform of state-owned enterprises, the operating efficiency has been improved and there is more room for tapping the potential within the company. We estimate that the gross profit margin will increase by 1 percentage point and the net profit will increase by about 10 million.
Cash is the king, and the second main business is on the rise.
The company sold its real estate business at 770 million yuan in 2015, and its financial structure was greatly optimized. At present, the debt ratio is only 31.7% and the cash on hand is 350 million. The company has made it clear that it will "open up new industries and achieve 50% of the output value of new industries by 2020." Considering the target and completion time, we believe that the company may develop its second main business through epitaxial mergers and acquisitions or group asset injection. Therefore, the follow-up capital operation of the company will continue to advance, which is worth looking forward to.
Investment suggestion
It is estimated that the EPS of the company from 2016 to 2018 will be 0.33 swap 1.30 yuan. Cotton prices upward led to the reversal of viscose staple fiber industry, new production capacity is limited, price increases are expected to continue. Viscose staple fiber price increase of 1000 yuan per ton, the company's EPS thickened 0.32 yuan; major shareholder Xingong Group companies have launched state-owned enterprise reform, the company's state-owned enterprise reform process will be accelerated; after the sale of real estate business, the company will still vigorously develop the secondary industry, the future extension mergers and acquisitions or asset injection is expected to be strong. With reference to comparable listed companies, it will be given 20 times PE in 2017, corresponding to the target price of 18.80 yuan, covering for the first time and given a "buy" rating.