\u3000\u3000 Xinjiang Zhongtai Chenical Co.Ltd(002092) (002092)
Event 1: on February 17, the company released its annual report for 2021. In 2021, the company achieved a revenue of 62.463 billion yuan, a year-on-year decrease of 25.8%; The net profit attributable to the parent company was 2.703 billion yuan, with a year-on-year increase of 1752% (before retroactive adjustment) / 1770% (after retroactive adjustment). Among them, in Q4, the company achieved a revenue of 20.225 billion yuan, a year-on-year increase of 5.1% and a month on month increase of 75.5%; The net profit attributable to the parent company was 238 million yuan, a year-on-year decrease of 60.1% and a month on month decrease of 67.4%.
Event 2: on February 7, the company disclosed the asset restructuring plan and planned to purchase 75.89% shares of MEC chemical by issuing shares and convertible corporate bonds. Before this transaction, the company held 24.11% shares of MEC chemical. After this transaction, MEC chemical will become a wholly-owned subsidiary of the company. Since the evaluation value and proposed price of the underlying assets of this transaction have not been determined, the payment proportion and quantity of shares and convertible corporate bonds of each counterparty in this transaction have not been determined.
Comments:
The volume and price of chlor alkali leading PVC and other products have risen simultaneously, and the profitability of companies stripping part of their trading business has been significantly enhanced. In terms of PVC, in the first half of 2021, due to the impact of the cold wave in the United States, the commencement of PVC plants was limited, resulting in a tight global supply of PVC; In the second half of 2021, driven by the “dual control” of China’s energy consumption, the prices of raw materials such as calcium carbide continued to rise, and the cost of PVC increased significantly. In October 2021, China’s PVC market price hit a record high. In terms of viscose fiber, with the gradual control of the epidemic, the overall demand for viscose staple fiber recovered. In 2021, the sales volume of PVC, caustic soda, viscose fiber and viscose yarn of the company was 190000 tons, 950000 tons, 270000 tons and 300000 tons respectively, with a year-on-year increase of 11%, 5%, 29% and 1.7% respectively; The average sales prices of PVC, caustic soda, viscose fiber and viscose yarn of the company were 7762 yuan / ton, 1872 yuan / ton, 10775 yuan / ton and 13983 yuan / ton respectively, with year-on-year changes of + 31%, – 13%, + 40% and + 32% respectively. Seizing the opportunity of the industry boom, the company realized the simultaneous rise of the volume and price of its main products, contributing to the substantial growth of profits in 2021. In addition, Q2 company divested part of its trading business after disposing of 60% equity of its wholly-owned subsidiary Shanghai Duojing in 2021. Although the divestiture of some trading businesses led to a year-on-year decrease in the company’s annual revenue, it made the company focus more on the main business of chlor alkali, and the overall profitability was significantly improved. In 2021, the gross profit margin of the company was 13.9%, with a year-on-year increase of 8.2pct. In the single quarter of 2021q4, due to the rising cost of raw materials, the gross profit margin of 2021q4 decreased by 5.3pct month on month. In addition, in 2021, the company made a total of 125 million yuan of asset impairment (11.46 million yuan of inventory and 113 million yuan of fixed assets) and 121 million yuan of credit impairment (109 million yuan of accounts receivable and 12.21 million yuan of other receivables). The relevant impairment provision mainly occurred in 2021q4. Therefore, the rising cost of raw materials and the provision for impairment jointly led to the decline of the company’s 2021q4 profit month on month.
We will continue to allocate new production capacity and expect future growth. At present, the production capacity of the company’s main products is: pvc2050000 tons / year, caustic soda 1.46 million tons / year, viscose fiber 730000 tons / year and viscose yarn 2.7 million spindles / year. In addition, the company has 2.38 million T / a calcium carbide capacity and 750000 T / a calcium carbide capacity under construction, which is expected to be put into operation in July 2022. At the same time, the company is building 60000 T / a PBAT capacity, and approved 120000 T / a PBAT capacity in January 2022. In the future, as the company’s projects under construction are put into operation, it will strengthen the synergy of the whole industrial chain of the company, open the downstream profit space and have a long-term growth.
It is proposed to acquire all the equity of Meike chemical through asset restructuring and strengthen the layout of BDO industrial chain. MEC chemical is the leader of 1,4-butanediol (BDO) in China, with a production capacity of 270000 tons / year. Another 100000 tons / year production capacity is under construction and is expected to be put into operation in October 2022. After the completion of this asset restructuring, the company will have an annual production capacity of 270000 tons of BDO, 620000 tons of formaldehyde (for the production of BDO) and 170000 tons of methanol (for the production of BDO), and will become a leading enterprise in China’s BDO industry. The acquisition of MEC chemical by the company through this transaction can deeply cut into the BDO fine chemical industry, further optimize the industrial layout of listed companies and improve the overall profitability of the company
Profit forecast, valuation and rating: benefiting from the simultaneous rise of volume and price of main business and the stripping of low gross profit trading business, the overall profitability of the company will be significantly improved in 2021, and the net profit attributable to the parent company will increase significantly. We temporarily ignore the impact of the acquisition of MEC chemical, maintain the company’s profit forecast from 2022 to 2023, and add the profit forecast for 2024. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be RMB 3.55/37.3/4.01 billion respectively. We are still optimistic about the future development of the company as a leader in the chlor alkali industry and maintain the “buy” rating of the company.
Risk tips: product price fluctuation risk, energy consumption regulatory policy risk, capacity construction is less than expected, asset restructuring landing risk, and downstream demand is less than expected.
