Sobute New Materials Co.Ltd(603916) (603916)
The company’s net profit attributable to the parent company in 21 years is expected to increase by 15% – 25% year-on-year
On the evening of January 4, the company issued the announcement of performance increase in 2021. It is expected that the net profit attributable to the parent company will increase by 66.1-110.2 million yuan year-on-year in 21 years, with a growth rate of 15% – 25%; The net profit deducted from non parent company increased by 66.22-110.37 million yuan year-on-year, with a growth rate of 15% – 25%. We calculated that the corresponding Q4 net profit attributable to the parent company was 140-184 million yuan, with a year-on-year growth rate of 1.1% – 32.9%, deducting the net profit not attributable to the parent company of 159-203 million yuan, with a year-on-year growth rate of 11.3% – 42.1%.
The market share of water reducing agent was further increased, and the amount of functional materials continued to increase
In the past 21 years, the company achieved a median net profit attributable to the parent company of about 530 million yuan, an increase of 20% year-on-year, mainly benefiting from: 1) outstanding achievements in product and technological innovation, further large-scale production of nine series polycarboxylic acid water reducer and functional materials, and an increase in the proportion of revenue; 2) Sichuan Tibet railway and other key engineering projects support the growth of demand; 3) Sichuan Daying base was put into operation. At the same time, the company further strengthened market development, and its sales and market share increased significantly in the Yangtze River Delta, Guangdong, Hong Kong, Macao, Dawan District, Shandong, Guangxi, Sichuan and Chongqing. Among them, Q4 achieved a median net profit attributable to the parent company of about 162 million yuan in a single quarter, with a year-on-year / month on month growth rate of 17% / 7.3% respectively, slightly higher than Q3. We expect that the company’s gross profit margin in Q4 may be better than that in Q3. On the one hand, the company has completed two rounds of price increases since the end of September, and the effect will appear in Q4. On the other hand, the price of ethylene oxide, the core raw material, has decreased rapidly since November, and the cost pressure has been relieved.
Wind power grouting may meet the development opportunity, and capacity expansion supports income growth
In the past 22 years, we believe that: 1) functional materials are expected to continue to develop. During the “14th five year plan” period, the installed capacity of offshore wind power may usher in a relatively large growth. According to the draft of the provincial “14th five year plan” offshore wind power planning, it is expected that China’s offshore wind power is expected to add more than 35gw from 2022 to 2025. The company is one of the few enterprises in China that can provide wind power grouting materials. It is also the first offshore wind power grouting material supplier certified by CCS in China. It has established a long-term strategic cooperation relationship with central business owners such as Three Gorges new energy, CGN new energy and national energy Longyuan Group. Zhenjiang phase II 100000 ton wind power grouting material project is expected to be put into operation in 2022, and the production capacity is in line with the release of offshore wind power demand. 2) The release of production capacity supported the main business of water reducing agent to maintain stable growth. The company’s high-performance water reducing agent project with an annual output of 300000 tons in Jiangmen, Guangdong Province is expected to be put into operation in the first quarter of this year, effectively supporting the development of the South China market; 3) Gross profit margin is expected to improve. In November, the price of ethylene oxide decreased rapidly, reaching 7500 yuan / ton at present. The possibility of sharp fluctuation in 22 years is relatively small. The superposition of the price increase effect of the company or jointly boost the improvement of profits. 22 years or fully benefit from stable economic growth, optimistic about medium and long-term growth
The company is a leader in China’s water reducing agent industry, and the key engineering fields account for a relatively high proportion in the downstream demand, which may fully benefit from the steady economic growth in 22 years. At the same time, the demand prospect for functional materials is better. The company accelerates the capacity expansion progress of functional materials. After the 370000 ton functional material project in Jurong, Jiangsu is put into operation, the capacity will nearly double. Considering that the performance forecast for 21 years is slightly lower than our expectation, the net profit of the company for 21-23 years is slightly reduced to RMB 530 / 680 / 850 million (previous value: RMB 540 / 7.2 / 920 million). Referring to the valuation of comparable companies, the company is given 20 times the target PE for 22 years, the target price is RMB 32.4, and the “buy” rating is maintained.
Risk tip: the production capacity is less than expected, the demand drops, and the price of raw materials rises sharply.
