Modified plastic enterprises, layout 5G industry chain. The company was listed in June 2017, mainly engaged in the R & D, production, sales and technical services of modified engineering plastics, modified general plastics and high-performance functional polymer materials.
The company's liquid crystal polymer (LCP) materials, polytetrafluoroethylene (PTFE) materials, modified PPE products and carbon fiber, carbon nanotube composites have a leading level of technology in the industry. In July 2014, the company purchased Samsung LCP production line and related intangible assets. In 2019, the company acquired 51% of Deqing Kesai with its own funds, entered the field of PTFE thin film materials for high-frequency communication circuit boards, enriched and extended the company's industrial chain, and formed a complete polymer material solution from base station to terminal in the 5G industry.
The cost end of modified plastics will reduce the pressure in the future. The main raw materials needed by the company are PC, PS, PPO, ABS, PP and other polymer resins. The purchase amount of the five major raw materials accounts for about 80%, which has a great impact on the cost side of the company. PC is one of the company's main raw materials, and its cost accounts for about 20% of the company's cost. With the launch of Luxi Chemical and other new capacity, PC prices began to decline in the second half of 2018.
In the next two years, there are still nearly 3 million tons of new domestic capacity waiting to be put into operation. It is expected that the price of PC will be under pressure in the future, and the pressure on the cost side of the company is expected to be reduced.
The prospect of LPC is good, and the opportunity of localization should not be missed. Liquid crystal polymer (LCP) is a kind of anisotropic aromatic polyester polymer material composed of rigid molecular chains, which has the characteristics of low moisture absorption, chemical corrosion resistance, good weather resistance, heat resistance, flame retardancy, low dielectric constant and low dielectric loss factor. It is widely used in electronic and electrical appliances, aerospace, national defense, optoelectronic communications and other high-tech fields. 5G requires higher dielectric constant and connection loss, and LCP is a substitute for PI. In the future, with the expansion of 5G range, especially the huge replacement demand in the stock mobile phone market, the demand for LCP materials is expected to increase significantly, and its market space is expected to reach billions of yuan. Walter acquired all LCP business of Samsung Precision in 2014, and is currently the only company in the world that can continuously produce three models of LCP resin and composite materials. It currently has a production capacity of 3000 tons per year, and cooperates with a number of customers to participate in the localization of related materials.
Profit forecast and rating. We select Golden hair Technology, Pulitte, Guoen shares and Dawn shares, which have the same LCP business as the company's reference companies. It is estimated that the company's EPS from 2019 to 2021 will be 0.41 yuan, 0.64 yuan and 1.03 yuan respectively, and the compound growth rate of net profit from 2019 to 2021 will be 52%. It will be covered for the first time and will be rated as "overweight".
Risk tips: the risk of safety and environmental protection, the risk of new project completion and production schedule or failure to meet expectations, the risk of raw material price fluctuations, the risk of weak downstream demand, the risk of exchange rate fluctuations.