Main data
Industry: Chemical Industry
Share price: HK $3.03
Target price: hkd3.88 (+ 28.08%)
Market value: 6.398 billion Hong Kong dollars
The year-round performance was under pressure, and the company's revenue in 2019 decreased by 8.86% to 12.959 billion yuan. The comprehensive gross profit margin was 26.6%, down 5.3 percentage points from the same period last year. Owners accounted for 1.463 billion yuan of profit, a year-on-year decrease of 31.28%, basic earnings per share of 0.7 yuan, and final dividend of HK $0.23 per share.
The demand began to pick up, and the fluorine industry chain performance was strong. In the past 19 years, the company's organic silicon business revenue fell by 20.53% to 2.686 billion yuan, accounting for 20.73% of the revenue, and the operating profit margin fell by 10 percentage points to 18.89%, which was improved compared with the mid-term. The demand for organosilicon began to pick up after June last year, and then the supply was tightened due to the impact of the manufacturer's maintenance, and the price began to pick up. This year, affected by the epidemic, the downstream construction was blocked, and the recent price trend of DMC is weak. We expect that with the start of the real estate market from April to may, the price will have further room to rise. The revenue of fluoropolymers and refrigerants decreased by 11.52% and 17.86% to 3.433 billion and 2.678 billion yuan respectively year on year, the operating profit margin decreased by 10% and 11% to 13.41% and 13.27% respectively year on year, and the revenue accounted for 26.49% and 20.66% respectively. Domestic demand for refrigerants is relatively stable, and the price of R22 remains firm. Since the fourth quarter of last year, it has been in the rising channel. Although the current price is slightly lower than that of the same period, the price of fluorite is about 30% higher than that of the same period, and the price of hydrofluoric acid is about 8% higher. Meanwhile, the quota of R22 is about 16% lower than that of last year, and the supply of R22 will be more tight. In the future, it will support the high-level operation of R22, and the price of fluoropolymer products will also be. Influenced by the new production capacity, we expect R32 and R125 to continue to bottom out this year, but with the supply of R22 continuing to shrink, the substitution effect of R32 and R125 will gradually highlight, with great potential in the future.
Organosilicon has been successfully separated and listed. In the future, the company's organosilicon Division has been successfully separated and listed, accounting for 57.75% of the company's equity. The fund will be used for the deep processing project of 300000 t / a organosilicon monomer and 200000 t / a downstream organosilicon products. After the completion of the project, the total capacity of the company's organosilicon monomer will reach 600000 tons / year, and the capacity scale is expected to enter the top five in the world, which will contribute considerable profits to the company in the future.
The performance is expected to recover with a target price of HK $3.88. Most of the products purchased by rating companies have bottomed out since the fourth quarter of last year. We believe that the company's performance has bottomed out. We expect that the product prices will keep rising this year and the profitability is expected to improve. In the long run, the company's share of high value-added products will continue to increase, and its business will be transformed into silicone and high-end polymers. We predict that the company's net profit attributable to the parent in 2020 will be 1.367 billion yuan, with a target price of HK $3.88, equivalent to 5 times of PE in 2020, with a 28.08% increase over the current price, maintaining the buy rating.
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