Shi Dashenghua (603026): Performance in line with expectations and Sinochem
Events: 1) Total operating income of the first three quarters of 2019 was 35.4.4 billion, down 7 every year.7%; net profit attributable to mother 3.30,000 yuan, an increase of 78% in ten years; of which, deducting non-net profit3.10,000 yuan, an increase of 74% in ten years.  2) The company plans to set up a joint venture with Sinochem Quanzhou Petrochemical Co., Ltd. to invest in the construction of 44 new energy materials projects.  Investment Highlights: Performance is in line with expectations, and DMC demand is strong. The company’s Q3 achieved a net profit of 78.15 million yuan, an increase of 105% year-on-year, and a decrease of 13% month-on-month. Due to the impact of power battery production, the demand for solvents and solvents improved in July and August, and it has improved in September. At the same time, DMC of Q3’s Jining plantThe equipment was passively stopped for maintenance, and the cost of material consumption caused by the start and stop of the equipment increased, and the overall performance continued the high growth in the first half of the year, in line with expectations.Consumer electronics enters the demand season. The demand for additional new energy vehicles is up month-on-month, and the demand for lithium iron phosphate batteries has driven the demand for DMC to increase.The current battery-level DMC price is about 9,700 yuan / ton, ranking at a low in June and growing by about 50%.It is expected that the 杭州夜生活网 production of two sets of polycarbonates in Ganning, Hubei, and Liyang, Henan, in Q4 will drive demand for DMC, supplement new energy vehicles into the end consumer peak season, DMC continues to supply and seek, and prices will further increase in Q4.  Together, we will increase the number of new energy materials in Quanzhou to increase production capacity and open up long-term space.The company plans to establish a joint venture with Sinochem Quanzhou Petrochemical Co., Ltd. to invest in the construction of a 44-year / year new energy material project, and the company holds a 55% stake.The project is constructed in two phases, including 12 input EC capacity and 10 DMC units. The construction period of the first phase of the project is from September 2019 to April 2021, and the second phase of the project is selected for 北京夜网 construction. The company estimates the total net profit of the project2.100 million, of which one period net profit1.0 million.The new production capacity adopts the technical route of EO-EC-DMC, and the raw material oxide (EO) is provided by Sinochem Quanzhou, which solves the problem that raw material EO is difficult to achieve long-distance transportation. The project is located in Fujian and is close to the needs of southern China.As a cleaning solvent, carbonates can be used as both alkyl solvents, and DMC can also be used as a raw material for non-phosgene polycarbonate, which has huge potential market space.The company’s joint effort with Sinochem in the deployment of carbonate production capacity will help consolidate its leading advantages, and at the same time provide momentum for the company’s rapid growth of lithium battery materials business, opening up long-term growth space.  Perfect industrial chain layout, focusing on new energy business.The company plans to establish a company-invested power battery calcium carbonate additive project of 5,000 tons, which will be constructed in two phases, with a total investment of 1.US $ 600 million, of which the first phase of the project was put into operation in August 2020, and the second phase of the project was put into operation in August 2021.  According to company estimates, the project is expected to bring annual revenue to the company.800 million, net profit1.10,000 yuan.At present, the company expands its layout in the field of lithium battery hexafluorophosphate, solvent and tertiary amine additives. This project will start to seize potential market opportunities, provide integrated services for industry manufacturers, tilt its business towards the new energy industry chain, and improve the company’s overall profitability.  Earnings forecast and investment rating: Considering the future trend of the company’s product prices and downstream demand, we appropriately lowered our earnings forecast. It is expected that the company’s net profit for 2019-2021 will be 4 respectively.5, 5.6,6.9 (Original value 5.2/6.1/7.0) Million US dollars, corresponding PE is 15, 12, and 10 times respectively. The demand for DMC is strong. It is expected that the price of Q4 will further increase, which will bring performance flexibility to the company. The company and Sinochem jointly develop new lithium battery materials production capacity and layout.Additives, focusing on the field of new energy, the company’s long-term growth space opens.Maintain “Buy” rating.  Risk reminder: DMC series product prices are lower than expected; original potential risks; new capacity release is lower than expected; systemic risks in the broader market.