Polyrocks Chemical Co.Ltd(688669) (688669)
Based on flame retardants and flame retardant plastics, expand the business of phosphorus chemical industry and recyclable materials. The company was established in June 2007 and listed on the science and innovation board in January 2021. Its traditional main businesses include halogen-free flame retardants, modified plastic particles and products, At the same time, the company has extended to the field of phosphorus chemical industry and recyclable materials by acquiring upstream raw material supporting business and expanding its business field.
The traditional flame retardant business is under pressure in the short term, and its profitability is expected to recover in the future. In 2021, affected by the production restriction of phosphorus chemical industry, the price of upstream phosphorus raw materials of the company increased significantly. In addition, the increase of overseas freight also increased the cost of imported bromide and other raw materials, and the short-term performance was under pressure. Looking forward to 2022 and the future, the company’s product long-term association orders are expected to be re signed, the cost pressure is gradually transmitted to the downstream, superimposed with the gradual correction of raw material costs and capacity expansion, and the profitability and overall performance of the company’s traditional flame retardant and flame retardant plastic particles / products business are expected to be improved.
Invest in the construction of EPP incubator project, which has great development space promoted by circular economy policy. Foamed polypropylene (EPP) is a new non-toxic, pollution-free, recyclable and degradable material. Its performance is better than the existing foamed materials, such as foamed polystyrene (EPS), foamed polypropylene (EPE), and has a wide alternative space. China’s express material market is developing rapidly. Under the pressure of environmental protection, recyclable Express materials are supported by policies and have a good development prospect. According to the calculation, under the fresh transportation scenario, the demand for EPP circulating packaging boxes may be hundreds of millions. The recyclable insulation box made of EPP material can be used in cold chain and fresh transportation industry. The company actively integrates into the circular economy industrial chain, expands the downstream application of EPP and improves profitability.
Longhua Chemical Co., Ltd. was acquired to lay out polyphosphate and cut into the lithium new energy supply chain. September 16, 2021, The company acquired Anhui Longhua Chemical Co., Ltd. (hereinafter referred to as “Longhua chemical”) with its own capital of 75.222 million yuan ）59.06% equity. Longhua chemical is an important supplier of flame retardant raw materials of the company. Through the acquisition of Longhua chemical, the company will carry out vertical integration of the industrial chain, which will further reduce the production cost. In addition, the polyphosphate produced by Longhua chemical is an important raw material for the production of liquid lithium hexafluorophosphate. At present, Longhua chemical has a capacity of 16000 tons / year of phosphorus pentoxide, 26000 tons / year of polyphosphate, and 100000 tons of polyphosphate and 20000 tons of phosphorus pentoxide are under construction. Benefiting from the strong demand for new energy, Longhua chemical’s polyphosphate production capacity is expected to bring large performance increment after release.
Profit forecast, valuation and rating: as the business model and corresponding capacity scale of the company’s EPP recyclable packaging material business have not been disclosed yet, without considering the performance contribution of EPP recyclable packaging material business, we expect the company’s net profit attributable to the parent company from 2021 to 2023 to be 103, 248 and 362 million yuan respectively, and the corresponding EPS to be 1.10, 2.65 and 3.87 yuan / share respectively. We give the company about 20 times PE in 2022, with the corresponding target price of 53.00 yuan, covering it for the first time, and give the company a “buy” rating.
Risk warning: the project construction progress is less than expected, the price of raw materials fluctuates, and the downstream demand is less than expected.
