\u3000\u3 China Vanke Co.Ltd(000002) 064 Huafon Chemical Co.Ltd(002064) )
Core view
The boom of spandex helped the company’s performance increase significantly in 2021. The company disclosed the annual report of 2021 and the first quarter report of 2022: benefiting from the sharp rise in the prosperity of the company’s leading products in 2021, the production and sales volume, sales price and gross profit margin of the company increased significantly compared with the same period of the previous year. In the whole year of 2021, the company’s main revenue was 28.367 billion yuan, a year-on-year increase of + 92.66%; The net profit attributable to the parent company was 7.937 billion yuan, a year-on-year increase of + 248.23%; Deduct non net profit of RMB 7.858 billion, a year-on-year increase of + 258.13%; In 2021q4, the company’s main revenue in a single quarter was 7.352 billion yuan, a year-on-year increase of + 53.75%; The net profit attributable to the parent company was 1.81 billion yuan, a year-on-year increase of + 74.39%; In 2022q1, under the background of the falling price of the main product spandex, the company still achieved an operating revenue of 7.293 billion yuan through the large volume of main products, a year-on-year increase of + 25.87%; The net profit attributable to the parent company was 1.362 billion yuan, a year-on-year increase of – 16.93%. The results of the company’s annual report and the first quarter report slightly exceeded our expectations. In the future, we will continue to accelerate the construction of spandex, adipic acid and polyurethane stock solution projects.
The supply margin of spandex was relaxed and the giant position of spandex industry was continuously consolidated. Since mid September 2020, affected by multiple factors such as the spandex industry entering the mismatch pattern of supply and demand, the recovery of downstream textile and garment demand, the transfer and return of overseas orders, the rise and support of dual raw material prices, the cycle boom of the spandex industry has reversed significantly, and China’s spandex industry has shown a significant mismatch pattern of supply and demand. The price of spandex has risen from the bottom of September 2020 to about 80000 yuan / ton at the end of Q3 in 2022, and the price has reached a record high in recent 10 years. 2021q4 with the release of new production capacity and the weak growth of downstream consumption, the supply-demand mismatch pattern of spandex has gradually evolved from the pattern of supply-demand mismatch to the state of tight balance and loose supply. For Huafon Chemical Co.Ltd(002064) company, in the future, with the release and increase of the proportion of new production capacity in Chongqing base with more significant profitability, we are optimistic that the company will continue to give full play to the advantages of scale and cost, and further consolidate the position of spandex giant by taking advantage of the advantages of new equipment, energy cost and intelligence of Chongqing base.
The expansion of downstream new materials is accelerated, and the demand drives the business cycle of adipic acid. The planned capacity of PA66 and PBAT in the downstream of adipic acid is huge. At present, the localization of PA66 has entered the stage of large-scale capacity construction. BDO’s newly added capacity with soaring prices in 2021 is fully planned, which is expected to assist the production of PBAT project, and the demand for adipic acid is expected to increase significantly. We estimate that the supply and demand gap of adipic acid in China from 2022 to 2025 is 6.1 / – 2.5 / – 8.146000 tons. The company has a designed capacity of 755000 tons of adipic acid, ranking first in the country, and is expected to fully benefit from the recovery of the prosperity of adipic acid industry.
Risk warning: the demand is less than expected; The commissioning progress of new projects is lower than expected; Sharp decline in product prices, etc.
Investment advice: maintain the “buy” rating. The price of spandex has declined recently. Under this background, we predict that the net profit attributable to the parent company from 2022 to 2024 will be RMB 6.777/80.73/9.220 billion respectively, with a year-on-year increase of – 15.9% / + 20.9% / + 14.2%; Diluted EPS = 1.44/1.74/1.99 yuan, and the current share price corresponds to PE = 5.4/4.5/3.9x. In the long run, the company’s growth is still significant, and will lead the development through innovation, transform from cost advantage to quality advantage, and further optimize the product structure and profit structure.
