Event

The company releases its third-quarter results report

In the first three quarters, the company achieved an income of 458 million yuan, an increase of 91.93% over the same period last year; a net profit of 134 million yuan, an increase of 225.22%; and a single quarter income of 176 million yuan for Q3, an increase of 110.58% over the same period last year and 5.48% month-on-month growth of 5.48%. The net profit of Q3 was 59 million yuan, an increase of 418.95%, and an increase of 31.69%.

Brief comment

Under the geopolitical background, the demand in the military field is booming, and the performance is high under the rising volume and price. By the middle of 2022, the production capacity of UHMWPE fiber has reached 3320 tons, and the production capacity of weft-free fabric has reached 800 tons. In terms of exports, the company's UHMWPE fiber exports accounted for 32.52% of similar domestic products in 2019. Europe is the company's second largest export region except Asia, and sales revenue accounted for 30.5% of overseas income in 2020. In the first three quarters of 2022, under the background of the conflict between Russia and Ukraine and geopolitical turbulence, the demand for protective products in the European and Asian markets increased significantly, and the demand for domestic military equipment was strong, and the company seized the mainstream opportunities in the market. Continue to increase the development efforts in the bulletproof equipment market, abundant orders, the demand for composite materials is growing at a high speed. In addition, the company will further improve the marketing network system with market competitiveness, further enhance customer stickiness, solve customer pain points, strengthen the development of domestic and foreign markets, and accelerate the expansion of big customers, big markets and new customers. and continue to open up cement enhancement, radome and other new application markets. Against the background of rising volume and prices of ultra-high molecular weight polyethylene fibers and composite materials, the company achieved revenue of 458 million yuan in the first three quarters, an increase of 91.93 percent over the same period last year, and a net profit of 134 million yuan, an increase of 225.22 percent over the same period last year. Gross profit margin is 40.15%, year-on-year increase of 7.06pct, expense rate of 10.25%, year-on-year decrease of 4.10pct, net profit of 29.31%, year-on-year increase of 12.01pct.

With excellent performance, wide application and rapid improvement in military demand, ultra-high molecular weight polyethylene fiber, also known as high-strength and high-modulus polyethylene fiber, is currently the fiber with the highest specific strength and specific modulus in the world. together with aramid fiber and carbon fiber, it is called "the three largest high performance fibers in the world". Its elongation at break is higher than that of carbon fiber and aramid fiber, its flexibility is good, and its mechanical properties are still good at high strain rate and low temperature. The anti-impact ability is better than that of carbon fiber and aramid, and it is a very ideal bulletproof and stab-proof safety protection material. in addition to the field of military equipment, it is also widely used in marine industry, security protection, sports equipment and other fields.

In terms of global supply and demand, from 2015 to 2020, the global theoretical demand for UHMWPE fiber increased from 57000 tons to 98000 tons, with a CAGR of 11.4%. It is estimated that the demand will reach 165000 tons in 2025, with an CAGR of 11.0%. The annual production capacity will be 65600 tons in 2020, and the products are in short supply. In terms of domestic supply and demand, from 2015 to 2020, domestic demand increased from 20000 tons to 49100 tons, with a CAGR of 19.6%. It is expected that the demand will reach 103800 tons in 2025, with a CAGR of 16.2%. In 2020, the domestic production capacity will be 42000 tons, but the output will be about 21000 tons, with most of the small production lines in the industry, with surplus capacity at the middle and low end, and limited actual start-up. Future production expansion will be concentrated in Jiujiu, Tongyi, Millennium Dragon Fiber, Nanshan Zhishang and other major enterprises, with orderly industry supply and continuous increase in production capacity.

Leading in scale and technology, fund-raising projects open up room for growth.

By the end of June 2022, the company has a production capacity of 3320 tons of UHMWPE fiber and 800tons of weft-free fabric. In terms of production capacity under construction, the company plans to increase the production capacity of 2240 tons of UHMWPE fiber and 2500 tons of weft-free fabric in Xintai base, as well as the production capacity of 500000 bulletproof chest inserts and 180000 helmets, which is expected to be put into production at the end of 2023.

In terms of technology, the company's UHMWPE fiber products are ahead of their peers in terms of fracture strength and initial modulus, and the performance of bulletproof materials and other related products has reached the level of similar international products. Under the continuous R & D investment, the company's product performance has been continuously broken through. The new generation of TYZ and DOYENTRONTEX high cutting resistant fiber products independently developed by the company have reached the foreign advanced level; the bulletproof fiber strength has reached 42cN/dtex and the modulus has reached 1800cN/dtex, which provides the basic material guarantee for the promotion of the company's high-end composite products. In the composite material market, based on the company TYZ, DOYENTRONTEX ultra-high-strength polyethylene fiber TM42 launched WB876 and HA894 high-end soft and hard bulletproof non-weft cloth to the market gradually recognized by the market, WB876 products are used in our army's new generation of individual protective equipment and police high-end protective equipment. In the international market, the company's bulletproof products continue to equip the world's military and police, and have been further applied in many regions and countries around the world. The company's PEUD products have passed the NIJ certification of customers in the United States, Brazil and other countries.

Profit forecast and valuation: it is estimated that the return net profit of the company from 2022 to 2024 is 1.81,2.10 and 272 million yuan respectively, the EPS is 0.81,0.94 and 1.21 yuan respectively, and the corresponding PE is 25.1X, 21.6 X and 16.7X respectively, maintaining the "buy" rating.

Risk Tips:

The downstream demand is lower than expected, the competition in the industry is intensified, and the project production is not as expected.