\u3000\u3000 Sobute New Materials Co.Ltd(603916) (603916)
Market expansion, concrete admixture industry space 55 billion +. Concrete admixture has become the fifth indispensable component in modern concrete except cement, sand, stone and water. Water reducing agent accounts for more than 70%. We estimate that the market space of admixture industry will reach at least 55.9 billion yuan in 2020, including 43.2 billion yuan of water reducing agent space. The improvement of ready mix rate and the penetration of machine-made sand in China have driven the rapid expansion of admixture market space.
High performance water reducing agent has become the mainstream, and the cost change has a high correlation with ethylene oxide. According to the water reducing rate, the water reducing agent can be divided into ordinary water reducing agent, high-efficiency water reducing agent and high-performance water reducing agent. The permeability of high-performance water reducing agent is increasing year by year, which is close to 80% at present, which plays a substitute role for high-performance water reducing agent. Ethylene oxide accounts for 70% of the total cost of high-performance water reducer, so the price fluctuation of ethylene oxide directly affects the profit level of enterprises.
Leading advantages are obvious, and R & D barriers are built. A new base is established every year, and the raising and investment of the company’s production capacity has accelerated significantly since the IPO. With the production of Sichuan Daying and Guangdong Jiangmen bases, the production capacity of high-performance water reducing agent mother liquor of the company will reach 571000 tons by the end of 2022, and the output of high-performance water reducing agent is expected to reach 1.75-1.9 million tons. R & D advantages build product barriers, and the product unit price and gross profit margin are in the leading position in the industry.
The demand for infrastructure has warmed up and the marketing network has been widened. In addition to capacity expansion, the company’s main business is expected to benefit from: 1) infrastructure investment is expected to make a good start in 2022 and the marginal demand for real estate is expected to improve; 2) Strengthen technology promotion, nationwide layout and broaden marketing network; 3) The synergy between the testing center and the main business is obvious.
Functional materials continue to iterate, open the second growth curve, and focus on wind power grouting materials and TPO waterproof materials. From 2016 to 2020, the company’s functional material revenue CAGR reached 47%. In 2020, the company’s functional material revenue was 431 million, accounting for 12%. 1) Crack resistant materials and traffic engineering materials continue to grow at a high rate: crack resistant materials benefit from the construction of underground concrete works and pumped storage power stations, and the speed of traffic engineering materials sector is increased under the background of the recovery of traffic infrastructure; 2) Wind power grouting slurry: the future development prospect of offshore wind power is optimistic, giving birth to the demand for wind power grouting slurry. We expect that the global sea wind grouting slurry market will expand to 1.8-3 billion yuan in 2025, with three times the incremental space. The domestic substitution space is broad, the company has accumulated profound grouting material technology, and the products have been widely used in China’s wind power market; 3) TPO waterproof material: TPO waterproof coiled material is raised and expanded to create a “rigid + flexible” waterproof system.
Investment suggestion: we estimate that the company’s capacity of high-performance water reducing agent from 2021 to 2023 will be 471000 tons, 571000 tons and 671000 tons respectively; From 2022 to 2023, the revenue of wind power grouting materials is 150 million yuan and 450 million yuan respectively. It is estimated that the net profit of the company from 2021 to 2023 will be 530 million yuan, 711 million yuan and 907 million yuan respectively, and the dynamic PE corresponding to the share price on January 19 will be 22x, 17x and 13X respectively. Considering the improvement of external environment, cost, comparable competitive advantage and leading valuation premium, the comparison of financial indicators and the expectation of continuous growth of the company’s revenue, we believe that the valuation premium of the company is 80% higher than that of its peers. According to the relative valuation method, 21xpe is given to the company in 2022. The net profit of the company in 2022 is 711 million, the reasonable market value is about 15 billion yuan, and the corresponding share price is 35.69 yuan per share. For the first coverage, give a “recommended” rating.
Risk warning: the recovery of infrastructure is less than expected; The production capacity is lower than expected; The expansion of new applied materials is less than expected; Risk of sharp fluctuations in raw material prices; Risk of loss of technical personnel; The difficulty of marketing personnel management increases the risk.
