Main points of the report

The company focuses on viscose fiber and is determined to increase its main business.

The company is mainly engaged in the production and management of viscose fiber and tap water. The company, formerly known as Nanjing Chemical Fiber Factory, which was completed and put into operation in 1964, currently has an annual production capacity of 148000 tons of viscose staple fiber and 20,000 tons of viscose filament, and its comprehensive strength is in the forefront of the industry. The company issued a fixed increase plan at the end of 2016, which intends to raise no more than 1.5 billion yuan, major shareholders subscribe for not less than 200 million yuan, the proportion is not less than 34%, to raise funds for the annual output of 160000 tons of differential viscose staple fiber project, to further consolidate the industry position.

Viscose short fiber scene demeanor upward, the company's performance elasticity is the greatest.

On the demand side, consumption upgrading led to the growth of domestic demand for viscose staple fibers. During the 12th five-year Plan period, the growth rate of domestic apparent consumption reached 12.1%, which was higher than that of yarn production in the same period. The devaluation of the RMB promoted the export volume, which increased by 44.2% from January to November 2016 compared with the same period last year, and is expected to continue to grow in 2017.

On the supply side, viscose staple fiber experienced four years of downturn after 2011, and the production capacity growth slowed down obviously. the domestic viscose staple fiber production capacity was about 3.9 million tons in 2016, and there was basically no new capacity in the industry in 2017. The introduction of the new Environmental Protection Law in 2015 has tightened the regulation of the industry, forcing small enterprises to withdraw, and the concentration of the industry will gradually increase.

As a substitute, there is a slight substitution relationship between cotton and viscose staple fiber, and the price is partially linked. Cotton production is insufficient, the relationship between supply and demand has improved, and prices have bottomed out, providing some support for the upward price of viscose staple fiber.

At the price level, the industry ushered in a turnaround in the second half of 2015. Prices fluctuated all the way up in 2016, with a maximum of more than 17,000 yuan / ton, and currently remained above 165,000 yuan / ton. We judge that viscose staple fiber will continue to be prosperous in 2017. When the price of viscose staple fiber increases by 1000 yuan / ton, the company's EPS thickens by 0.31 yuan.

The company aims at the strategic transformation of emerging industries.

The company's 2015 annual report said, "through private placement and other means, the rapid development of new industries, by 2020 to achieve the output value of new industries accounted for 50%." The company's fixed increase plan proposes that after the completion of the non-public offering, the company will actively expand new business in new materials and other fields on the basis of further expanding and strengthening the main business of viscose fibers. through mergers and acquisitions, asset injection and other ways to promote the further transformation and upgrading of the company's business, improve the company's profitability. The company is expected to increase the intensity of transformation and upgrading, and the follow-up layout is worth looking forward to.

Investment advice: give a "buy" rating for the first time

Viscose staple fiber continues to be in high prosperity, and the company has the greatest flexibility; the main business of viscose staple fiber will be increased to consolidate its leading position; under the background of the reform of state-owned enterprises, it is committed to the development of the second main industry and the transformation to emerging industries. The market capitalization is small, the flexibility is big. It is estimated that the company's EPS from 2016 to 2018 will be 0.33,0.90,0.99 yuan, giving a "buy" rating for the first time.

Risk tips: 1. Viscose short fiber scene is not as good as expected.

two。 The promotion of fixed increase projects is not as expected.

3. Environmental risks.