Events:

Laike Chemical entered into an asset lease agreement with Xiajin Zhenhua Chemical Technology Co., Ltd., and Zhenhua of Xiajin County agreed to lease OBA production facilities to Laike Chemical for a period of three years at an annual rent of RMB 4.3 million. The term may be renewed by either party by notice in writing to the other party before its expiration and in accordance with the terms of the mutual agreement.

Comment

Laike Chemistry is mainly engaged in the production of dyes, pigments and pesticide intermediates, and the main product in the period is DSD acid. DSD acid is an important raw material for OBA production. The lease asset agreement signed this time is mainly used for the production of OBA. The production line has a capacity of about 6000 tons and now has a capacity utilization rate of about 67 per cent. After taking over, the company will gradually improve the capacity utilization OBA is mainly used to improve the brightness or whiteness of paper and textiles. It is also the core ingredient in the production of paper and textile dyes, plastics and consumer fluorescent brighteners. At present, there is no similar product that can be replaced.

The production line leased by the company is mainly for the production of printing, dyeing and washing OBA, the proportion of printing and dyeing OBA is relatively small, and the production capacity utilization will also be expanded in the future, mainly to expand the production of washing OBA. Now customers mainly rely on channel sales.

According to this, the lottery officially enters the production field of OBA downstream of DSD acid, and one ton of DSD acid produces about 3.8t OBA, which has a synergistic effect on the company's industrial chain. OBA is often used in paper, textiles, detergents and cosmetics in daily life. We believe that the company's move is of great strategic significance. Expanding downstream as the largest producer of DSD acid will help to improve the company's profitability and stabilize its market position. In the long run, the impact of crude oil prices on the company's DSD acids will be weakened by internal digestion.