\u3000\u3000 China Jushi Co.Ltd(600176) (600176)
The company released the annual performance forecast. It is estimated that the net profit attributable to the parent company will be RMB 5.80-7.01 billion in 2021, with a year-on-year increase of 140% – 190%; It is estimated that the net profit deducted from non parent company is RMB 4.85-5.83 billion, with a year-on-year increase of 150-200%, and the performance is more than our previous expectation.
Key points supporting rating
In the fourth quarter, the net profit deducted from non parent company was flat month on month, and the non recurring profit and loss significantly increased the profit: Taking the median value of the performance forecast, the net profit returned to parent company in 2021 was 6.4 billion yuan, and the net profit deducted from non parent company was 5.34 billion yuan; In the fourth quarter alone, the net profit attributable to the parent company was about 2.1 billion yuan, deducting the net profit not attributable to the parent company of 1.39 billion yuan and the non recurring profit and loss of 710 million yuan. In the fourth quarter, the net profit deducted from non parent company was basically flat month on month, but the incremental scale of non recurring profit and loss was large, which was an important reason why the company’s performance exceeded expectations. We expect that the non recurring profit and loss items are mainly the sale of precious metals and government subsidies.
The main business is generally stable, and the production and operation of glass fiber is good: the price of glass fiber alkali free yarn in the fourth quarter is about 6220 yuan, which has fallen slightly recently, but it is still at a historical high. The prices of electronic yarn and electronic cloth fell significantly in the fourth quarter. According to Zhuo Chuang information, the inventory of glass fiber industry accumulated slightly in December, but it is still at a low level with a high safety margin.
Tight balance between supply and demand, optimistic about the prosperity of glass fiber industry in 2022: we estimate that the demand for glass fiber in 2022 is about 6.8-6.9 million tons, with a large increase; Under the circumstances of stricter environmental protection policies, tight energy consumption control and high platinum and rhodium metals, the new supply is expected to slow down. We estimate that the net new production capacity is expected to be about 600000 tons in 2022, and the supply and demand pattern of the glass fiber industry is expected to continue to improve.
Valuation
Considering that the non recurring profit and loss items significantly thickened the company’s profits, the supply and demand pattern of the glass fiber industry is expected to continue to improve, and we correspondingly raised the company’s performance expectations. It is estimated that from 2021 to 2023, the company’s revenue will be RMB 18.12 billion, RMB 20.36 billion and RMB 21.6 billion respectively; The net profit attributable to the parent company was RMB 6.61 billion, RMB 6.94 billion and RMB 7.15 billion respectively; EPS was 1.65, 1.73 and 1.79 yuan, maintaining the company’s buy rating.
Main risks of rating
The new capacity was intensively invested, the price of natural gas rose sharply, and the demand fell faster than expected.
