Shenma Industry Co.Ltd(600810) (600810)
China’s Nylon 66 industry leader has a good profit trend
The company’s main business is the production and sales of nylon 66 industrial silk, cord fabric, slicing, adipic acid and other products. It is the leader of China’s Nylon 66 industry. At present, the company’s main production capacity includes 210000 tons of nylon 66 chips, 133000 tons of nylon 66 industrial silk, 80000 tons of nylon 66 cord fabric and 290000 tons of adipic acid. Since the beginning of this year, the upstream supply pattern has improved, driving the sales price of the company’s main products nylon 66 chips, industrial silk and cord fabric to rise significantly. The average price in the third quarter of 2021 increased by nearly 104%, 41% and 47% respectively year-on-year, while the price of main raw material adiponitrile increased by only 20%. Benefiting from the expansion of price difference and integration advantages of main products, the net profit attributable to the parent company in the first three quarters of 2021 was RMB 1.618 billion, a year-on-year increase of 11 times.
Benefiting from the localization of adiponitrile, the demand for nylon 66 will grow rapidly
Tianchen Qixiang Zibo 200000 tons of adiponitrile and INVISTA Shanghai 400000 tons of adiponitrile will be completed and put into operation at the end of 2021 and the middle of 2022 respectively. The increase of upstream supply will not only improve the current capacity utilization of the company, but also stimulate the rapid growth of downstream demand for nylon 66 in automobile, civil silk and other fields, which is conducive to the company’s continuous expansion of nylon 66 capacity and consolidate its market leading position. Based on the difficult technology and long R & D cycle of adiponitrile, it is expected that its supply pattern will be orderly in the future, and the price difference of PA66 is expected to remain at a high level.
Increase capital and introduce new material fund to expand and strengthen nylon industry
On December 14, 2021, the company announced that nylon chemical, a wholly-owned subsidiary of the company, plans to introduce Jinshi manufacturing transformation and upgrading new material fund by means of non-public agreement capital increase. Jinshi fund will increase capital by 1.2 billion yuan and hold 20% – 25% equity of nylon chemical. This capital increase will help the company speed up the construction of 400000 tons of hydrogen ammonia project and related industrial chain integration projects, Build a nylon new material base with international competitiveness.
Expand aramid products and continue to develop new material business
In October 2020, the company invested RMB 100 million in cash to establish a wholly-owned subsidiary Henan Shenma aramid Technology Development Co., Ltd. to build a high-performance para aramid fiber project with an annual output of 2000 tons. It is estimated that the total investment is 686 million yuan, the construction period is 2.5 years, and the average annual sales revenue is 393 million yuan, Tax investment payback period (including the construction period) 7.84 years. According to the market situation and the company’s feasibility study data, aramid products have a good profit, with a net profit of more than 50000 yuan per ton of aramid and a gross profit rate of more than 25%. According to the company’s mid-2021 report, the book balance of the company’s projects under construction at the end of the period is 2.27 billion yuan, including 100000 t / a polycarbonate phase I, 25000 T / a BOPA film, 20000 t special nylon 66 chips and 30000 T / A , 6-hexanediol, bisphenol a project, etc.
Profit forecast and investment rating
It is estimated that the operating revenue of the company from 2021 to 2023 will be RMB 13.032/146.36/16.36 billion respectively, the net profit attributable to the parent company will be RMB 1.004/22.41/2.590 billion respectively, the EPS will be RMB 1.85/2.17/2.51 respectively, corresponding to the closing price of RMB 11.82 on December 21, and the PE will be 6 / 5 / 5 times respectively. Considering that the company is the leader of nylon 66 industry, benefiting from the localization of upstream adiponitrile, and continues to layout aramid and other new materials for the first time, Give the company an “overweight” rating.
Risk statement
There are risks of sharp fluctuations in raw material prices, blocked downstream demand expansion and lagging project production.
