High-tech enterprises that adhere to technology research and development as the guide. The company's main business is deep processing of fuel oil after catalytic cracking, or catalytic slurry, to develop, produce and sell heavy aromatic hydrocarbon products such as asphalt additives, rubber additives, lubricant additives and purer lightweight fuel oils as chemical raw materials. The company's revenue in 2017-2019 was 362 million yuan, 582 million yuan and 827 million yuan respectively, up 37.64%, 60.91% and 42.08% respectively over the previous year.
Net profit attributable to the mother in 2017-2019 was 84 million yuan, 89 million yuan and 76 million yuan respectively, up 19.64%, 7.13% and -15.34%, respectively. The company's comprehensive gross margins in 2017-2019 were 40.53%, 27.93%, and 18.74%, respectively, and profitability declined markedly.
The downstream market space is broad, and the growth in production and sales strengthens the company's position in the industry. Heavy aromatic hydrocarbon products are widely used, covering the downstream rubber industry, asphalt industry, lubricant industry, transportation industry, etc. The asphalt industry is closely related to road infrastructure. The apparent consumption of asphalt in 2017-2019 was 32 million tons, 29554,900 tons, and 31,9807 million tons, respectively. We believe that the increase in demand for asphalt roads in the next few years may drive an acceleration in demand for road asphalt. The main downstream products of rubber additives are automobile tires, etc. Nearly 90% of rubber additive applications are automobile-related, and 70% of rubber additive production is used in tire production. The tire industry and the automobile industry are the biggest forces affecting the development of rubber additives.
The scale of revenue has been growing steadily, and profitability has picked up. The company's main products use fuel oil as a raw material to produce heavy aromatic hydrocarbons and light fuel oil. In 2017-2019, the company's main products accounted for about 90% of revenue. The company's main business is outstanding. In 2017-2019, the company's main business revenue was 362 million yuan, 582 million yuan and 827 million yuan respectively, accounting for 100.00%, 100.00% and 99.99% of operating income, respectively.
From 2018 to the first half of 2019, due to the influence of crude oil prices, the sales price of the company's products was at an all-time high, and the gross profit per product unit declined, leading to a marked decline in the gross margin of the company's products; in the second half of 2019, the tight supply of raw materials was basically eliminated, and the company's profitability rebounded.
Fundraising projects relieve pressure on production capacity and drive the company's product upgrades. The company's IPO plans to raise capital to invest in “600,000 tons/year environmentally friendly aromatic hydrocarbon oil and 200,000 tons/year paraffin production project” and “supplementary working capital”. Fundraising projects can drive the upgrading of the company's existing products to green and environmentally friendly products, and are also conducive to the digestion of the product market after the completion of future fund-raising projects. According to the prospectus, it is estimated that after the project reaches 100% of the production load and the price remains at the market level, it will generate sales revenue of 2,600 million yuan per year, with a total profit of 238 million yuan.
Profit forecast and valuation range. We expect the company's net profit to be 0.91/1.40/207 million yuan respectively in 2020-2022, and the corresponding EPS is 0.87/1.35/1.99 yuan. We will give the company 16-20 times PE in 2020. The corresponding reasonable value range is 13.92-17.40 yuan. We recommend purchasing.
Risk warning. The risk of fluctuations in raw material prices, the risk of fluctuations in the sentiment of the downstream industry, and the risk that new projects fall short of expectations.