In the field of carbon fiber industry, Chinese enterprises are still catching up with international leaders, especially in high-performance carbon fiber. Sinofibers Technology Co.Ltd(300777) is a representative enterprise in China’s high-performance carbon fiber industry chain. It leads China in the supply of high-end products above T700. In recent years, it has shown a good development trend of rapid growth in performance, leading the industry in profitability and substantial expansion of production capacity.
I. focus on high-performance carbon fiber track, and supply high-end products above T700 to China’s leading
Sinofibers Technology Co.Ltd(300777) is a high-tech enterprise specializing in the R & D, production, sales and technical services of high-performance carbon fiber and related products. It has complete independent intellectual property rights. Its main products are high-end, high-performance carbon fiber and its fabrics, which are used in the field of aerospace. According to the company’s prospectus: ” Sinofibers Technology Co.Ltd(300777) is the leader in the research and development of high-performance carbon fiber technology and the stable production of engineering industrialization in China. It takes the lead in realizing the stable mass production of zt7 series carbon fiber in China and applies it to the high-end field of aerospace. It is in an absolute leading position in the batch supply of carbon fiber higher than T700.”
The development process of the company focuses on the R & D and application of aerospace carbon fiber. In 2008, the company was established to undertake the key project “863 polyacrylonitrile based carbon fiber engineering” of the Ministry of science and technology. In 2010, a 150 ton / year (12K) or 50 ton / year (3K) high-performance carbon fiber production line was built. In 2011, T700 Carbon fiber products meeting the requirements of aerospace indicators were prepared. In 2012, they were included in aviation model management and transferred to the stage of engineering application verification. The brand number was determined as zt7 series, filling the gap of engineering application of T700 Carbon Fiber in China. In 2012, the company achieved stable production of zt8 series carbon fiber. By 2014, the company’s zt7 series carbon fiber had completed multi batch audit in the engineering application stage and transferred to batch stable supply. In 2013, the company successfully developed high model zm40j (M40J grade) graphite fiber. From April 2014 to now, zt7 series carbon fiber and carbon fiber fabric of the company have entered the stable supply stage and are fully applied in the aerospace field. At the same time, research and development of higher performance carbon fibers such as T1000, t1100, m55j and m60j have been carried out.
The company is a typical scientific and technological innovation enterprise led by scientists. The actual controllers of the company are Yang Yonggang and Wen Yuefang, who act in concert. Among them, Yang Yonggang is the chairman of the company and Wen Yuefang is the director, general manager and chief engineer of the company. Yang Yonggang and Wen Yuefang are leaders in China’s carbon fiber industry and have been engaged in the scientific research of high-performance polyacrylonitrile based carbon fiber and its composites for a long time. At present, a R & D team with long-term stable personnel, advanced R & D concept and engineering implementation ability has been formed. The core members are from Shanxi Coal Chemical Institute. After four generations and 50 years of inheritance and accumulation, they have successively undertaken and successfully completed a number of national major research and development tasks, and experienced the development of domestic high-performance carbon fiber from the laboratory The whole process from pilot test to engineering application. The team has won many honorary titles such as “aviation high-performance carbon fiber innovation team” and “Jiangsu innovation and entrepreneurship team”.
The technical level of the company is leading in the industry, and the product performance has reached the advanced level of similar products in the world. The company has the engineering industrialization ability of high-strength zt7 series (higher than T700), zt8 series (T800), zt9 series (T1000 / t1100) and high model M40J and m40x graphite fiber. In terms of performance, the mechanical properties of zt7 series carbon fiber of the company are between Toray T700 in Japan and Im7 in the United States, the tensile modulus is higher than Toray T700 Carbon fiber, and the comprehensive properties are better than Toray t700s carbon fiber in Japan. In addition, the technology used by the company to produce high-performance carbon fiber and related products is self-developed and has completely independent intellectual property rights; The production process is developed independently, 98% of the production equipment is designed independently, and all the key equipment are localized; The key raw and auxiliary materials used in production are Chinese supporting or self-made; The core control system adopts domestic DCS automatic system.
II. The business performance is growing rapidly, the profitability industry ranks first, and the capacity expansion plan is huge
Under the situation that China’s high-end carbon fiber market is in short supply, the company has a good development trend, and its revenue and net profit have shown a rapid growth trend in recent five years. The company’s revenue increased from 150 million yuan in 2016 to 390 million yuan in 2020, with an average annual compound growth rate of 27%; The net profit attributable to the parent company increased from 57 million yuan in 2016 to 232 million yuan in 2020, with an average annual compound growth rate of 42%. In the first three quarters of 2021, the company’s revenue and net profit attributable to the parent company reached 300 million yuan and 145 million yuan, with a year-on-year increase of 15% and 10% respectively.
Sinofibers Technology Co.Ltd(300777) the operating revenue mainly comes from carbon fiber and carbon fiber fabric, of which carbon fiber accounts for more than 80% and 84.56% in 2020. From the perspective of product models, the products produced on a large scale and the main source of revenue of the company are high-performance zt7 series. According to the data disclosed in the prospectus, the sales revenue of zt7 series carbon fiber and fabric of the company in 2018 was 212 million yuan, accounting for 99.77% of the operating revenue of the current year. The main application field of the company’s products is military products. In 2018, the sales revenue of military products accounted for 99.77% of the operating revenue. It can be determined that the company is a manufacturer of pure military high-performance carbon fiber (zt7 Series). Due to its focus on high-performance carbon fiber products with higher value, Sinofibers Technology Co.Ltd(300777) product added value and profit level are far ahead of Chinese peers, with a gross profit margin of 84% and a net profit margin of 60% in 2020.
Sinofibers Technology Co.Ltd(300777) the main customers are China’s large aerospace enterprise groups, and the industry attribute leads to high customer concentration. According to the 2020 financial report, the total sales amount of the top five customers accounts for 99.61% of the company’s total annual sales, of which the sales amount of the first largest customer accounts for 87% of the company’s total annual sales. This is mainly due to the highly centralized business model of China’s aerospace industry. Upstream supplier enterprises generally have the characteristics of customer concentration. We can see the same situation from the financial reports of similar companies. However, the attribute of downstream customers determines the characteristics of high concentration, which also gives the company an advantage in customer stickiness. Carbon fiber products entering customer procurement need to go through multiple stages and long-term rigorous evaluation and verification process. For example, the company’s zt7 series has officially entered the stage of mass production only after the thorough evaluation, stability, allowable value, engineering application and other stages and batches by aerospace authorities in recent three years. In the production process of aerospace equipment, once the model is determined, the raw materials used will not be easily changed. Generally, the service cycle is long and the price is relatively stable. Moreover, the company generally participates in product development and application with major customers, deeply binds with users, and increases customer stickiness.
From the upstream point of view, the raw materials used by the company to produce carbon fiber are mainly acrylonitrile, and the energy used is mainly electricity, nitrogen and steam. Acrylonitrile is a bulk chemical raw material, and its price changes with the petrochemical industry.
Since the company’s products are mainly used in the aerospace field, the competent department of national defense science, technology and industry has clear requirements for the company’s procurement objects. Suppliers must be selected from the list of qualified suppliers reviewed and filed by military representatives. These suppliers have strong production capacity and stable product quality. According to the company’s disclosure, the procurement amount of the company’s top five suppliers accounts for more than 70% of the total procurement, and its Changzhou power supply branch of China Grid Jiangsu Electric Power Co., Ltd. accounts for 40% (2018 data). Among the company’s main raw and auxiliary materials and energy procurement costs, electricity accounts for the largest proportion, followed by nitrogen, acrylonitrile, steam, oil agent, etc.
After listing, the company successively launched capacity expansion plans to ensure future development space. The company had only one 150 t / a (12K) or 50 t / a (3K) high-performance carbon fiber production line built in 2010. In 2019, Sinofibers Technology Co.Ltd(300777) was listed on the gem of Shenzhen Stock Exchange, raising 221 million yuan for 1000 t / a (12K) domestic T700 Carbon fiber expansion project. The equipment commissioning of the project was completed in March 2020, reaching the expected serviceable state and converted to fixed assets. In September 2021, the equivalence verification of the thousand ton line passed the review. At the end of December 2021, the company said that the thousand ton line had been officially put into operation. According to the disclosure of the company, due to the different specifications of bundle wires (a bundle of wires composed of several filaments), the weight ratio of 12K and 3K is 4:1, and the capacity conversion relationship with weight as the statistical unit is about 3.3:1. Since the existing and IPO raised investment projects must give priority to ensuring the product demand of customer a for zt7h-3k, the production capacity is temporarily calculated as 400 tons according to the product specification of 3K. According to 12K product specifications, the oxidation and carbonization capacity of existing and IPO projects is converted to 1350 tons.
In October 2021, Sinofibers Technology Co.Ltd(300777) issued a prospectus for the issuance of shares to specific objects. It plans to raise 2 billion yuan, of which 1.65 billion yuan will be invested in the high-performance carbon fiber and fabric product project (the total investment of the project is 1.867 billion yuan). The construction period is four years, and the new capacity will be 1500 tons / year (12K) after completion. According to the reply to the implementation letter of feedback on Sinofibers Technology Co.Ltd(300777) application for issuing shares to specific objects for registration (Revised Version), the company has received product demand letters from several customers. Except for M40J and m55j series graphite fibers, the demand received for other products is close to or reaches the capacity to be built in this raised investment project. Combined with the transformation of the company’s previous demand letters, with the promotion of customer application product finalization and mass production progress, this part of the demand letters can be transformed into effective contracts or orders, and the digestion of new capacity can be guaranteed. In addition, the supply of China’s high-performance carbon fiber market will remain in short supply for a long time, which is also conducive to the digestion of the company’s production capacity. According to the calculation assumption, the normal year after the project is put into operation can bring annual sales of 1.716 billion yuan, annual cost of 643 million yuan and annual net profit of 1.073 billion yuan.
