Nanjing Cosmos Chemical Co.Ltd(300856) (300856)
Key investment points
After 20 years of deep cultivation in the industry, the products have entered the international mainstream market system.
Nanjing Cosmos Chemical Co.Ltd(300856) was founded in 2000 and listed on the gem in 2020. It has gradually grown into one of the world’s leading manufacturers of chemical sunscreen. Synthetic flavor products also have strong competitiveness in the international market. In 2015-2019, the company’s revenue / net profit attributable to the parent company CAGR reached 24% / 64%, and the 21q1-q3 revenue / net profit attributable to the parent company were RMB 740 / 110 million respectively, with a year-on-year increase of – 2% / – 6%, and the sales gross profit margin / net profit margin was 29.8% / 15.0%. In terms of revenue split, the revenue of 21h1 cosmetics active ingredients and their raw materials / synthetic spices accounted for 63.6% / 32.7% respectively; The proportion of overseas / domestic revenue is 83% / 17% respectively.
Sunscreen: the rise of sunscreen awareness drives the high demand, and the global chemical sunscreen leader is deeply bound to the stable basic plate of international customers.
Industry: the demand for sunscreen is becoming more and more rigid, and the global market scale has reached US $12 billion, driving the growth of upstream sunscreen demand. According to Euromonitor, 1) terminal: in 2019, the global / Chinese sunscreen cosmetics market scale was US $12 / 2.1 billion, and in 2015-2019, the global / Chinese CAGR was 3% / 9%. 2) Upstream: the global / Chinese consumption of sunscreen is about 54 / 12000 tons, and the CAGR is about 8% / 15% from 2015 to 2020. It is expected to maintain a compound growth rate of 4% / 7% in the next five years. Company: the global leader in the scarcity of sunscreen with a market share of about 30%, which is basically stable in binding with international customers. Sunscreen faces relatively strict supervision in Europe and America, and the company relies on 1) professional management system With complete qualifications (FDA audit and EU cosmetic raw material specification certification), stable supply and high-quality products; 2) rich sunscreen product matrix (basically covering mainstream chemical sunscreen), it cuts into the international supply chain, deeply cooperates with international leaders such as DSM, and has a solid basic market. The global market share of the company’s products in 17-19 years (in terms of sales volume) increased from 21% to 28%.
Synthetic perfume: the space is vast and the barrier is deep. The company has cultivated deeply for many years and grew steadily.
Industry: the terminal is widely used, and the concentration of the midstream market is high. According to IALConsultants, the global flavor and fragrance market ended in 2020 at a terminal scale of US $30 billion 200 million, and CAGR in the global / Asia Pacific market was 5%/7% in the past 5 years. Spices have high requirements for safety and aroma stability, with deep barriers, and the industry Cr4 is about 50%. Company: starting from synthetic spices, a variety of products have high market competitiveness. The global flavor and spice market, the first place in the market, is fourth of the company’s customers.
Short, medium and long-term driving, with considerable upward elasticity.
1) Short term: it has entered the price increase channel, and the performance will be repaired. 21q1-q3 the company’s performance is at a low point due to the repeated impact of the epidemic on the demand for sunscreen, exceeding the expected rise in raw material costs and sea freight. At present, the company has entered a new round of price increase channel, and the price of newly signed orders has increased. It is expected that the company’s performance is expected to be repaired quickly from 21q4 to 22q1-q2.
2) Medium term: the production capacity of the projects invested by raising funds in 22-23 years is expected to be fully released, contributing to the high growth of income and profits. By 2020, the company has a total production capacity of 33600 tons / year, including 23800 tons / year of sunscreen raw materials and 9800 tons / year of synthetic spices. The capacity utilization rate of the two businesses exceeds 80%, and the orders are full. The capacity of phase I project of Maanshan project invested by the company will be released mainly in 22-23 years, Among them, the new annual production capacity is 2000 tons of avobenzone (put into operation in 2020), 1000 tons of octyltriazinone (put into operation in 21q2), 6000 tons of salicylic acid related products (put into operation in 21q3), and 500 tons of diethylaminohydroxybenzoyl benzoate, a new sunscreen (expected to be put into operation in 22h2). Among them, octyl triazinone and diethylaminohydroxybenzoyl benzoate have high selling prices, or will become the main driving force of performance.
3) Long term: add the layout of whitening, moisturizing and other raw materials, and then expand the growth ceiling of the company.
On the basis of chemical sunscreen and synthetic spices, the company reserves active ingredients such as whitening, antioxidant and high-end sunscreen in advance. In 2021, the company invested in the construction of high-end personal care products industrial bases in Anqing and Nanjing respectively, and then expanded the medium and long-term growth ceiling. The annual production capacity of Anqing project is 95000 tons, and the annual output value is expected to be about 4.3 billion yuan.
Profit forecast and Valuation:
In conclusion, the company is one of the world’s leading manufacturers of chemical sunscreen. With a complete process flow line and strict quality management, the company deeply binds to international major customers and continues to benefit from the high prosperity dividend of the sunscreen industry. It is expected to achieve rapid performance recovery in the short term, release positive superimposed capacity in the medium term, and enable the expansion of long-term horizontal product matrix. It is expected that the revenue and profit will achieve rapid growth in 22-23 years.
It is estimated that the company’s revenue in 2021, 22 and 23 will be RMB 1.09 billion, 15.3 billion and 1.9 billion respectively, with a year-on-year increase of 7.7% / 40.9% / 23.8%; The net profit attributable to the parent company was 160 / 250 / 330 million yuan respectively, with a year-on-year increase of – 1.6% / 55.8% / 30.1%. The current market value corresponding to PE is 41 / 26 / 20x, which has a certain room for improvement compared with the peers. The “buy” rating was given for the first time.
Risk tips:
The risk of high customer concentration, the risk of price fluctuation of raw materials, the risk that the project is not put into operation as expected, the risk of policy change, international market risk, the risk of intensified and repeated epidemic, and the risk of production safety.
