\u3000\u30 Xuchang Ketop Testing Research Institute Co.Ltd(003008) 01 Shandong Taihe Water Treatment Technologies Co.Ltd(300801) )
Key investment points:
The company is the first enterprise in China to realize the continuous production of water treatment chemicals. The 2021q4 industry pattern has improved significantly, and the profitability of water treatment chemicals business has improved significantly. At the same time, the company is involved in the chlor alkali business. We believe that on the one hand, the company consolidates the cost advantage through vertical integration, on the other hand, it expands to the field of lithium battery materials and opens up the growth space of the company.
Shandong Taihe Water Treatment Technologies Co.Ltd(300801) is a manufacturer of chemicals for industrial circulating water treatment
The company is located in Zaozhuang, Shandong Province. Its products mainly include phosphorus series and polymer water treatment agents. It is the first company in China to realize the continuous production of main products by using tubular reactor. It is the pharmaceutical leader in China. We calculate that the company will occupy about 8.3% of the market share of circulating water treatment agents in China in 2021. The market scale of water treatment chemicals has gradually expanded, and the current industry pattern has improved. In the future, considering the advantages of environmental protection and financing, the leading market share will be further improved, and the company’s water treatment chemicals business will enter the channel of double increase in volume and profit margin.
The by-product liquid chlorine of chlor alkali project has the potential of upward integration
The company plans to lease the assets of the chlor alkali project with an annual output of 300000 tons and a by-product of 250000 tons of liquid chlorine. The project is located in the park where the water treatment agent is located. Liquid chlorine is highly toxic. It is the upstream raw material of phosphorus trichloride, an important raw material of the company. With the gradual tightening of the policy of tank truck transportation, the cost of chlorine consumption increases. The company can realize pipeline transportation in the park and has the potential to supplement the upstream phosphorus trichloride at low cost in the future.
Lithium battery materials business is expected to grow into the second growth pole
The rapid development of new energy vehicles has driven the rapid increase in the demand for lithium battery materials. The company has entered the lithium battery materials business. At present, lithium iron phosphate and vinyl carbonate (VC) projects are under construction and are expected to be put into operation in the fourth quarter of 2022. It is noteworthy that the by-product liquid chlorine of chlor alkali project is the raw material of many lithium battery materials such as VC, and the company has the foundation to set foot in other lithium battery materials.
Profit forecast, valuation and investment rating
We estimate that the net profit attributable to the parent company in 202224 will be 390 million yuan, 620 million yuan and 750 million yuan respectively, corresponding to EPS of 1.8 yuan, 2.9 yuan and 3.5 yuan respectively, and the current share price corresponding to PE of 12x, 7x and 6x respectively. According to the FCFF valuation model, the company’s target price in 2022 is 29.79 yuan. In view of the continuous improvement of the company’s main business pattern & new energy materials open up growth space and cover it for the first time, the company is given a “buy” rating.
Risk tips
The risk that the business expansion of lithium battery materials is less than expected; Risk that the operation of chlor alkali project is less than expected
