Maintain an “Overweight” rating. The company plans to transfer shares in Polycarbon and also to terminate the fund-raising project for the BPA (Phase II) project with an annual output of 240,000 tons. Taking into account the subsequent transfer progress and operating conditions, the company's 24-26 EPS was maintained at 0.39/ 0.57/ 0.70 yuan. Referring to comparable companies, considering that the company is a leader in the nylon 66 industry and that there are certain barriers upstream in the industry, the company was given 25.23 times PE in 24 years and maintained a target price of 9.84 yuan for 24 years.
It is proposed to transfer shares in a polycarbon company, focusing on the main nylon business. The company announced on June 13 that it intends to transfer 71% of its shares in the polycarbon materials company to its controlling shareholder, China Pingmei Shenma Group.
The share transfer price this time was based on the evaluation results. The 71% share transfer price was 591 million yuan. China Pingmei Shenma Group paid the equity consideration in cash. After this transaction, the scope of the consolidated financial statements of Shenma Co., Ltd. will change, and the financial statements of Polycarbon Materials will no longer be included in its consolidated financial statements. This transfer divested part of the loss-making business (assets), which can effectively improve the company's profitability. This transfer is in line with the company's strategic positioning and long-term interests. The company will focus on the nylon business to promote healthy enterprise development, which is of positive significance to the company's financial situation, operating results and future development in the long run.
It is proposed to terminate the annual BPA (Phase II) fund-raising project to reduce the pressure on the industrial chain. The company also announced that it intends to terminate the “BPA Project with Annual Production of 240,000 Tons (Phase II)”. The bisphenol A market is sluggish. The gross margins of the company's polycarbonate (PC) and bisphenol A products in 2023 were 8.24% and 1.17%, respectively, at a low level. Based on the company's current gross profit margin of similar projects, the performance of operators and current market demand, the industry is still under great pressure. The company's termination of the second phase of the project can reduce the pressure on the bisphenol A-PC industry chain and is beneficial to the company's medium- to long-term development.
Lay out the upstream and downstream industrial chains and expand the PA66 civilian sector. In terms of the industrial chain layout, the company's self-built hydrogen ammonia project has been put into operation. The 50,000 ton adiponitrile project is expected to be put into operation by the end of 24, achieving self-sufficiency in adiponitrile, a key raw material. The company's controlling shareholder's 20,000 ton aminohexanitrile project has been put into operation, and 100,000 tons of production capacity has been built to develop downstream caprolactam products and a new process route for caprolactam to make hexanediamine. The company cooperated with Yili to establish a company in Pingdingshan. At the same time, it also acquired 25% of each shares of Yilijin and Yili Plastics, and increased capital to Yili Nylon to enter the field of nylon 66 high-end civilian yarn. The company plans to build a 20,000 tons/year nylon differentiated fiber project in Thailand to meet and expand the development needs of the tire manufacturing industry in Southeast Asia and North America.
Risk warning: raw material prices fluctuate; projects under construction are postponed; demand for nylon 66 falls.