LEE & MAN CHEMICAL(00746.HK):STRATEGIC EXPANSION AMIDST MARKET CONSOLIDATION
LEE & MAN CHEMICAL(00746.HK):STRATEGIC EXPANSION AMIDST MARKET CONSOLIDATION
We maintain the TP at HK$4.30 and reiterate "Buy" rating. We maintain the forecasted EPS in 2023-2025 at HK$0.581/ HK$1.136/ HK$1.489, respectively, which represents YoY growth of (58.5%)/ 95.3%/ 31.1%. We maintain the TP at HK$4.30, representing 2023/ 2024/ 2025 PER of 7.4x/ 3.8x/ 2.9x, respectively.
Lee & Man Chemical (LMC, or the "Company") is a beneficiary of the acceleration in market consolidation. Since the start of 2024, except for some of the polymers products like PTFE, LMC's other main products have seen price declines, with caustic soda, dichloromethane, and hydrogen peroxide decreasing by 2.3%, 7.6%, and 6.7% YTD, respectively. While short-term profits of the Company may be impacted, price declines are poised to eliminate smaller, highly indebted companies and accelerate market consolidation. With a very low gearing ratio of 9.8% as at 1H23 and significant presence in the Jiangsu and Jiangxi markets, we expect LMC to gradually increase its market share as weaker players exit the market and also through acquisition of smaller players.
Active expansion into new materials businesses. The expansion project in Jiangxi, once completed in 2025, can produce 10,000 tons/year lithium hexafluorophosphate (LiPF6), 20,000 tons/year polyvinylidene fluoride (PVDF), and 50,000 tons/year of ancillary hydrogen fluoride products. In addition, the 3,000 tons/year of fluoroethylene carbonate (FEC) facility in Zhuhai, which is planned to be completed in two phases by 2024 and 2025, will significantly increase the Company's production capacity for lithium-ion battery electrolyte additives. We estimate that these products can contribute an additional revenue of RMB3.3 billion at current market prices, once in full production.
Catalysts: 1) The acceleration in market consolidation may raise the Company's market share, and; 2) the Company's new materials projects are set to commence production in 2024 and 2025.
Risks: 1) The coming years may see intense market competition due to significant capacity increases, and; 2) technological advancements in batteries could profoundly impact the demand for the Company's products.
We maintain the TP at HK$4.30 and reiterate "Buy" rating. We maintain the forecasted EPS in 2023-2025 at HK$0.581/ HK$1.136/ HK$1.489, respectively, which represents YoY growth of (58.5%)/ 95.3%/ 31.1%. We maintain the TP at HK$4.30, representing 2023/ 2024/ 2025 PER of 7.4x/ 3.8x/ 2.9x, respectively.
我們將目標價維持在4.30港元，並重申 “買入” 評級。我們將2023-2025年的預期每股收益分別維持在0.581港元/1.136港元/1.489港元，同比增長（58.5％）/95.3％/31.1％。我們將目標價維持在4.30港元，相當於2023年/ 2024/ 2025年市盈率分別爲7.4倍/3.8倍/2.9倍。
Lee & Man Chemical (LMC, or the "Company") is a beneficiary of the acceleration in market consolidation. Since the start of 2024, except for some of the polymers products like PTFE, LMC's other main products have seen price declines, with caustic soda, dichloromethane, and hydrogen peroxide decreasing by 2.3%, 7.6%, and 6.7% YTD, respectively. While short-term profits of the Company may be impacted, price declines are poised to eliminate smaller, highly indebted companies and accelerate market consolidation. With a very low gearing ratio of 9.8% as at 1H23 and significant presence in the Jiangsu and Jiangxi markets, we expect LMC to gradually increase its market share as weaker players exit the market and also through acquisition of smaller players.
理文化學（LMC，或 “公司”）是市場整合加速的受益者。自2024年初以來，除聚四氟乙烯等部分聚合物產品外，LMC的其他主要產品價格有所下降，燒鹼、二氯甲烷和過氧化氫年初至今分別下降了2.3％、7.6％和6.7％。儘管該公司的短期利潤可能會受到影響，但價格下跌有望淘汰規模較小、負債累累的公司，加速市場整合。截至23年上半年，LMC的資產負債率非常低，爲9.8％，並且在江蘇和江西市場佔有重要地位。我們預計，隨着較弱的參與者退出市場，以及通過收購小型企業，LMC將逐步增加其市場份額。
Active expansion into new materials businesses. The expansion project in Jiangxi, once completed in 2025, can produce 10,000 tons/year lithium hexafluorophosphate (LiPF6), 20,000 tons/year polyvinylidene fluoride (PVDF), and 50,000 tons/year of ancillary hydrogen fluoride products. In addition, the 3,000 tons/year of fluoroethylene carbonate (FEC) facility in Zhuhai, which is planned to be completed in two phases by 2024 and 2025, will significantly increase the Company's production capacity for lithium-ion battery electrolyte additives. We estimate that these products can contribute an additional revenue of RMB3.3 billion at current market prices, once in full production.
積極向新材料業務擴張。江西的擴建項目一旦於2025年完工，每年可生產1萬噸六氟磷酸鋰（LiPF6）、2萬噸/年的聚偏二氟乙烯（PVDF）和5萬噸/年的輔助氟化氫產品。此外，位於珠海的年產3,000噸碳酸氟乙烯（FEC）工廠計劃於2024年和2025年分兩個階段完工，將顯著提高公司的鋰離子電池電解質添加劑的生產能力。我們估計，按當前市場價格計算，這些產品一旦全面投產，可以帶來33億元人民幣的額外收入。
Catalysts: 1) The acceleration in market consolidation may raise the Company's market share, and; 2) the Company's new materials projects are set to commence production in 2024 and 2025.
催化劑：1) 市場整合的加速可能會提高公司的市場份額，以及；2) 公司的新材料項目定於2024年和2025年投產。
Risks: 1) The coming years may see intense market competition due to significant capacity increases, and; 2) technological advancements in batteries could profoundly impact the demand for the Company's products.
風險：1）由於產能的大幅增加，未來幾年可能會出現激烈的市場競爭；2）電池的技術進步可能會對公司產品的需求產生深遠影響。
譯文內容由第三人軟體翻譯。
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