Zhejiang Longsheng: The supply pattern improved and the price of dyes and intermediates rose

2021-04-25

Zhejiang Longsheng 600352, the stock

Supply pattern improved

The price of dyes and intermediates rises

highly recommended

Minsheng Securities Yang Lin

First, master the industry pricing power

Zhejiang Longsheng has a capacity of 140,000 tons of disperse dyes, accounting for 24% of domestic disperse dyes; 60,000 tons of reactive dyes, and the top three in domestic production. In the case of environmentally strict conditions, the dyes are brought to the attention of the regulatory authorities due to the large amount of industrial wastewater. Under the pressure of environmental protection, SMEs are unable to deploy environmental protection equipment, and the concentration of supply industry has further increased. At the same time, the company and the Bauxite Group formed a strategic partnership, which greatly grasped the pricing power of the industry and pushed up the price increase of dye products. Since 2017, the demand for downstream dyed fabrics has begun to pick up. In the first quarter of 2018, the export value of textiles and garments increased by more than 5% year-on-year. At the same time, domestic demand still has room for improvement. At present, China's per capita fiber consumption is 25 kg/person. The country is 40-45 kg / person. Textile and apparel demand has driven the use of dyes, superimposing low stocks under weak demand in previous years, and supporting dye prices. The company's dye business will benefit from this good supply and demand pattern. The price of disperse dyes and reactive dyes will increase by 2,000 yuan/ton, and EPS will increase by 0.05 yuan and 0.02 yuan respectively.

Second, the intermediate business is expected to continue to rise

The major producers of resorcinol in the world include Sumitomo Chemical (30,000 tons), US INDSPEC (22,000 tons) and the company's 30,000 tons capacity. At present, the resorcinol industry has experienced the withdrawal of INDSPEC capacity, leaving only 60,000 tons of capacity, while the global demand for resorcinol is about 60,000 tons, and the industrial supply is in a tight balance. Since 2017, the price of resorcinol products has continued to rise. The price of resorcinol has increased from 60,000 yuan/ton to the current 115,000 yuan/ton, and the price of m-phenylenediamine has increased from 20,000 yuan/ton to the current 3 10,000 yuan / ton. As a domestic resorcinol faucet, the company currently has a production capacity of 30,000 tons, and its future production capacity will be expanded to 50,000 tons. At the same time, the intermediate phenylenediamine production capacity of 60,000 tons will directly benefit from the increase in intermediate prices. The price of resorcinol and m-phenylenediamine will increase by RMB 5,000/ton, and the EPS of the company will increase by 0.04 yuan and 0.02 yuan.

Third, profit forecast and investment advice

We expect the company's net profit attributable to the company from 2018 to 2020 to be 3.33 billion yuan, 4.33 billion yuan and 5.20 billion yuan respectively. EPS is 1.02 yuan, 1.33 yuan and 1.60 yuan respectively. The current share price PE is 11.9X, 9.1X and 7.6X respectively. According to the Shenwan Chemical Index, the dynamic level is about 24 times PE level, and the first coverage is given a “strongly recommended” rating.