\u3000\u3000 Polyrocks Chemical Co.Ltd(688669) (688669)
Event 1: on the evening of January 10, the company announced that it would invest abroad to establish its subsidiary poly Chain Operation Co., Ltd. (tentative name, hereinafter referred to as “poly chain operation”), with an investment amount of 50 million yuan. Poly chain operation plans to carry out the development, leasing and sales of recycling packaging products, and provide packaging recycling and operation services for customers in vegetables and fruits, aquatic products, fresh food, medicine, express delivery and other industries. The main products in the initial operation of the project are EPP cycle incubators that can replace white foam boxes and PP circulation hollow plate boxes which can replace cartons.
Event 2: on the evening of January 10, the company announced that the company’s wholly-owned subsidiary, puserfu, planned to increase capital by 30 million yuan to Longhua chemical. The form of this capital increase is that PSF subscribes for 7.5377 million additional shares issued by Longhua chemical at a price of 3.98 yuan per share. Upon the completion of this capital increase, the shareholding ratio of the company’s wholly-owned subsidiary pushefu to Longhua chemical will be increased from 59.06% to 66.87%.
Comments:
EPP has superior performance and huge market space for circular packaging application. Foamed polypropylene (EPP) has better mechanical properties than traditional foamed polystyrene (EPS), foamed polyurethane (EPU) and other foam materials. It has better impact resistance, thermal insulation and environmental impact. Therefore, the packaging box made of EPP can be recycled many times. In addition, EPP is usually foamed with supercritical CO2, and the production process is non-toxic and pollution-free. The company’s EPP circulating incubator is mainly used in cold chain transportation of fresh food, aquatic products, food, medicine and so on. According to the calculation in the article “reversal of traditional business performance, broad growth space for recyclable materials and new energy materials – Polyrocks Chemical Co.Ltd(688669) investment value analysis report” released by us in December 2021, the demand for EPP recycling packaging boxes will be hundreds of millions under the scenario of fresh transportation. In terms of EPP raw materials, the company announced in November 2021 that it plans to invest 300 million yuan to build a new material recycling industrial park project in Jiangling County, Hubei Province. The construction content includes EPP beads, which will provide raw material support for the company’s EPP recycling packaging business and have a certain industrial chain synergy.
The increase of express delivery leads to a surge in packaging waste, and the application of PP recycling packaging box can solve the urgent problem. According to the data of the State Post Office, as of December 8, China’s express business volume has reached 100 billion pieces in 2021, and China’s express business volume has ranked first in the world for eight consecutive years. However, the surge in express business volume has also led to a synchronous surge in solid waste generated by express packaging. According to the China Securities Journal, in China’s mega cities, the increment of express packaging waste has accounted for 93% of the increment of domestic waste, while the corresponding data in some large cities are 85% – 90%. On December 6, 2021, the national development and Reform Commission, the Ministry of Commerce and the State Post Office jointly decided to organize the pilot of large-scale application of recyclable express packaging, issued relevant notice documents, and proposed to promote a number of recyclable express packaging products with convenient use, low cost, green and low carbon. The main target market of the company’s PP circulation hollow box packaging product is to replace the existing postal express boxes, foam boxes and other packaging materials. Through the reuse of PP recycling packaging box, the generation of solid waste such as one-time express packaging can be greatly reduced, which is conducive to the construction of “waste free city”.
Increase capital in Longhua chemical industry and deepen the layout of phosphorus based new energy materials. Longhua chemical currently has 16000 T / a capacity of phosphorus pentoxide and 26000 T / a capacity of polyphosphoric acid, and 100000 t / a capacity of polyphosphoric acid and 20000 t / a capacity of phosphorus pentoxide are under construction. Among them, Longhua chemical’s phosphorus pentoxide products can provide raw materials for the company’s main phosphorus flame retardant products. Another product, polyphosphate, is an important raw material for the production of liquid lithium hexafluorophosphate. The specific product route is “polyphosphate – phosphorus pentafluoride – liquid lithium hexafluorophosphate”. According to the patent of Guangzhou Tinci Materials Technology Co.Ltd(002709) , the purity of phosphorus pentafluoride prepared by polyphosphoric acid is higher and can better meet the requirements for the purity of raw materials in the production process of lithium hexafluorophosphate. Based on the strong demand of the new energy industry, China’s lithium hexafluorophosphate production capacity is also increasing rapidly. With the launch of new capacity of lithium hexafluorophosphate production enterprises represented by Guangzhou Tinci Materials Technology Co.Ltd(002709) , the company’s new capacity of polyphosphate will be effectively digested. The company’s further capital increase to Longhua chemical shows the company’s confidence in the development of phosphorus based new energy materials business, and further deepens the company’s business layout of phosphorus based new energy materials
Profit forecast, valuation and rating: the company’s proposed new subsidiary, cluster operation, has not been formally established and formally carried out relevant business, and we will not consider the corresponding performance increment for the time being. We maintain the company’s profit forecast. It is estimated that the net profit attributable to the parent company from 2021 to 2023 will be 103, 248 and 362 million yuan respectively, and the corresponding EPS will be 1.10, 2.65 and 3.87 yuan / share respectively. We believe that the performance of the company’s main traditional businesses such as flame retardants and modified plastics is expected to improve, and the business layout of phosphorus based new energy materials and recyclable packaging materials will open up growth space for the company. We still maintain the company’s “buy” rating.
Risk tip: the project construction progress is less than expected, the price of raw materials fluctuates, the downstream demand is less than expected, and the promotion of green recycling incubator products is less than expected.
