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YINGTIANHUI


13

2016

-

06

Chlor-alkali chemical company research briefing: chlor-alkali industry trough, the company optimizes the industrial layout.

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The company's main chlor-alkali products. The company mainly produces and sells caustic soda, chlorine and chlorine products, as well as PVC plastic resins and products. At present, the annual production capacity of the company's main products is 720000 tons of caustic soda, 650000 tons of liquid chlorine, 720000 tons of dichloroethane, 60000 tons of paste polyvinyl chloride resin, 20000 tons of special polyvinyl chloride resin and 10000 tons of chlorinated polyvinyl chloride resin. In 2015, the market continued to be depressed due to factors such as macroeconomic and industry overcapacity. In 2015, the company achieved revenue of 6.17 billion yuan, down 12.04 year-on-year, to achieve a net profit of 95.615 million yuan. 2016Q1 achieved revenue of 1.12 billion yuan, down 27.21 YoY, and net profit of 9.426 million yuan, up 132.28 YoY.

The supply of paste resin contracted and product prices rose sharply. The company's paste resin production mainly has mixed method and seed emulsion method two production processes, widely used in the paint industry, building materials industry, medical industry and other fields, mainly used in artificial leather, floor leather, wallpaper, toys and bottle caps and other products. Since February 2016, the demand side: the domestic market demand for PVC paste resin has improved after the Spring Festival; Supply side: Several large PVC paste resin production enterprises did not start work due to various reasons. The parking and relocation of Tianjin Botian Chemical Industry has brought strong support to the price rise of PVC paste resin. The market price of PVC paste resin rose from 6700 yuan/ton at the beginning of the year to 8400 yuan/ton, an increase of 26%. At present, the company's 60000 tons of paste resin plant operating rate of 7-80%, benefiting from the rise in product prices.

Win-win cooperation with the upstream and downstream of the industrial chain to create a circular economy. The company cooperates with BASF, Bayer, Huntsman, Covestro and other international chemical giants in Shanghai Chemical Industrial Park to provide raw material chlorine and caustic soda for MDI/TDI/PC and other devices in the park, and uses ethylene raw material, secondary chlorine, digestion of by-product hydrogen chloride, production of dichloroethane, and raw material chlorine and caustic soda are supplied through pipeline partition wall type, which ensures the stability and safety of supply and saves logistics cost.

Huayi Group's core assets are listed as a whole, and the company optimizes its industrial layout. In 2015, Huayi Group, the controlling shareholder of the company, implemented reorganization and integration, injecting the group's core high-quality assets into Shuangqian shares (now referred to as "Huayi Group"). The other two listed entities of the group are chlor-alkali chemical industry and Sanaifu. On May 10, 2016, Sanaifu issued an announcement to implement major asset restructuring, and chlor-alkali chemical industry also focused on optimizing the industrial layout. The company has decided to take Shanghai Chemical Industry Zone as the main battlefield of the company's development. In the past three years, the company has implemented the PVC shutdown of Wujing Base, the transfer of 90% equity of Dakai Company, 44% equity of Tiantan Company, the transfer of assets such as idle buildings on the ground of the group company, etc. The company focuses on long-term development, actively adjusts and improves the industrial layout, enriches the product structure, and actively develops chlorine-containing fine chemicals and vinyl materials, seize the market share of high-end chemical and fine chemical products and enhance the company's overall profitability.

Earnings forecasts and investment recommendations. In 2016, under the circumstances that the price of PVC paste resin rises and chlor-alkali is stably supplied to downstream customers in the park, the net profit attributable to the parent company from 2016 to 2018 is expected to be 1.64/1.82/0.254 billion yuan respectively, up 71.21/11.19/39.30 year on year. The corresponding EPS is 0.14/0.16/0.22 yuan respectively. Since most listed companies in the chlor-alkali industry are currently in a state of loss, reasonable relative valuation cannot be given, the company's P/E ratio is slightly higher than the industry average, so it is not given a rating for the time being.

Risk Warning: The risk of a sustained decline in the price of the main product, the risk of a significant change in the cost of raw materials.









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