Shanghai Huide Science & Technology Co.Ltd(603192) (603192)
Shanghai Huide Science & Technology Co.Ltd(603192) is the leader in the subdivision of polyurethane materials. The main products are polyurethane for synthetic leather (PU synthetic leather), polyurethane elastomer stock solution and polyester polyol. The specific reasons why we are optimistic about the company are as follows:
Core view
The company has strong competitiveness: the polyurethane industry in which the company is located is a fully competitive industry. The average operation of TPU is 60%, and the average operation of sole stock solution and slurry is 40-50%. The company is almost full production and full sales every year. Its main customers include international large enterprises such as huntsman and Japan world union group, which can see the recognition of customers for the company. Customers’ recognition of the company mainly comes from the company’s pursuit of product quality and the accumulated knowhow, which can quickly respond to customers’ needs.
Industry demand has changed: we have observed two important changes in the polyurethane material industry: first, new energy vehicle enterprises represented by Tesla and velai choose PU synthetic leather to replace leather and PVC artificial leather, and all choose low VOC environment-friendly PU leather. The demand for polyurethane for solvent-free high end leather is expected to increase. Secondly, polyurethane materials are made into power battery buffer pads and thermal insulation patches to provide reliable cushioning, sealing, thermal insulation and vibration isolation for lithium-ion batteries, which is an important incremental demand in the future. By 2025, the global demand for new energy vehicles will reach 22 million. Calculated according to the value of single lithium battery cushion of 500 yuan, assuming that the penetration rate reaches 100%, the global market scale will reach 11 billion yuan.
The company welcomes business improvement: with the capacity of Fujian Huide climbing, the company will break the capacity bottleneck. With the growth of high-end demand, the product structure of the company’s sales will be optimized in the future, and the net profit per ton is expected to increase. In addition, the sharp rise in raw material costs in 21 years eroded the company’s profits, and the company’s gross profit margin decreased from about 20% before to about 12% in 2021q3. In the past 22 years, with the gradual decline of raw material costs and the upgrading of product structure, it is expected that the gross profit margin will gradually return to the normal level.
Financial forecast and investment suggestions
Based on the judgment of demand growth and the company’s production capacity launch progress, we predict that the company’s EPS from 2021 to 2023 will be 1.25 yuan, 2.35 yuan and 3.45 yuan respectively. Based on 27 times PE of comparable companies in 2022, the target price of 63.57 yuan and buy rating are given for the first time.
Risk statement
The price of raw materials has risen sharply; The demand is less than expected; The price transmission is not timely; The production schedule is lower than expected; Capacity digestion fails to meet expectations; The market capacity of new applications is less than expected; Valuation decline risk.
