Recently, the company released its quarterly report for 2020, with operating income of 1.135 billion yuan in the first three quarters, an increase of 28.37% over the same period last year, and a net profit of 174 million yuan, an increase of 28.28% EPS0.81 yuan over the same period last year. Of this total, Q3 had an operating income of 357 million yuan in a single quarter, an increase of 4.92% over the same period last year, and its net profit was 49 million yuan, down 7.35% from the same period last year.
Main points:
Excluding the disturbance of a single quarter, the overall business situation continues to improve.
As the leader in the production of water treatment pharmaceuticals in China, the overall sales of all kinds of water treatment pharmaceuticals have increased since 2015. H1 achieved a net profit of 126 million yuan in 2020, an increase of 50.69% compared with the same period last year. Q3's single-quarter profit decreased slightly. We analyze that the main reason is that downstream enterprises are actively restocking in the second quarter, and some orders move forward, so the company will maintain a growth trend throughout the year. The company's downstream customers are all over the world, overseas accounts for more than 50%, and has strong international competitiveness. At the same time, the company's domestic and foreign customers are scattered, and the overall anti-risk ability is strong.
The global water treatment pharmaceutical market will continue to grow rapidly in the future, and there is a huge space for the industry.
According to BCC Research data, the global market for water treatment pharmaceuticals was US $34.46 billion in 2018 and is expected to grow to US $46.56 billion by 2023, with an average annual compound growth rate of 6.20%. Emerging markets such as Asia-Pacific benefit from urbanization and grow even faster. China's water treatment pharmaceutical market was worth US $3.71 billion in 2017 and is expected to reach US $5.549 billion by 2022, with an average annual compound growth rate of 8.38%, with huge room for growth. The company has obvious comprehensive advantages in the fields of scale, technology, cost and customers in the water treatment pharmaceutical industry, and will fully benefit.
New and old production lines will be replaced, and fund-raising projects will open up room for growth.
By the end of 2019, the company has a full range of water treatment chemicals with a production capacity of 265000 tons. It is one of the few water treatment pharmaceutical enterprises in China that carry out large-scale production.
After reaching production, the company's IPO investment project will increase its production capacity by 592700 tons, of which 280000 tons of water treatment agent project will focus on expanding production of current mainstream products such as HEDP and ATMP, breaking through the capacity bottleneck and contributing 370 million yuan to net profit after reaching production. The water treatment series product project includes the upgrading and transformation of the original workshop technology, the new green non-phosphorus water treatment agent project and the extension of the water treatment agent industry chain, which will contribute 740 million yuan in net profit after reaching production. After reaching production, the total net profit contributed by the fund-raising project will exceed 1 billion yuan, which is more than 5 times the 19-year net profit of 159 million yuan.
Investment suggestion
It is estimated that the company's operating income from 2020 to 2022 will be RMB 1.591 billion, an increase of 27.7%, 39.0%, 36.6%, and net profit of RMB 2.35, 325, and 429 million, respectively, and a year-on-year growth rate of 37.2%, 38.0%, 32.0, and 1.090, respectively, corresponding to PE in 24-17-13. As a leading enterprise of water treatment pharmaceuticals, with the landing of fund-raising projects and the opening of production capacity in the future, we are optimistic about the future growth of the company, covering for the first time and giving an "overweight" rating.
Risk hint
Risks such as rising raw material prices, falling product prices, and slower-than-expected production expansion.