Listed companies benefit from rising organic silicon prices

Recently, the price of organic silicon has increased significantly. Data show that on November 4, the silicone DMC commodity index was 115.98, an increase of 10.83 points from the 3rd, setting a new historical high in the cycle, and an increase of 64.74% from the lowest point of 70.40 on July 27, 2016. Listed companies will benefit significantly.

Many factors catalyze price increases

Tianfeng Securities (601162), although the price of the silicone industry in the second quarter of 2020 is at the bottom of the consolidation, supply and demand are good, the operating rate of enterprises is high, and the inventory can be effectively eliminated; in the third quarter, the downstream real estate, textile and apparel industry demand recovery stimulated , Product prices have achieved rapid rise. Recently, the price of silicone DMC has risen from the bottom 15,000 CNY/ton to 19,000 CNY/ton.

China Securities (601066) believes that the reasons for the general rise in silicone prices in this round include: the supply and demand of overseas silicon products are tight, and September-November is the traditional peak season for the silicone industry. Silicone prices hovered at a low level from the beginning of this year to August. In fact, with the exception of individual high-quality companies, most of the companies' silicone businesses are near the break-even line. The current round of silicone price increases will significantly increase the profitability of related companies. It is recommended to pay attention to the independent growth path of industry leaders and the valuation repair space of related listed companies.

According to industry insiders, in the current DMC market, on the one hand, the supplier controls shipments, and on the other, the demand side has increased the stock volume, which has caused an abnormally tight market. At present, the entire DMC market has tight spot and smooth transmission, and continues to be bullish. It is expected that the market will have room for further upside in the short term. Taking into account that the order companies received good orders in November, it is expected that by the end of November, the overall market will be strong and expected to run strongly.

Which stocks are worth focusing on?

Tianfeng Securities recommends paying attention to Xinyaqiang. Reason for recommendation: The company is a leading enterprise in the segment of organic silicon additives, and is the first enterprise in China to realize the large-scale production of diphenyldichlorosilane. The company began to get involved in the phenyl silicone monomer industry and made breakthrough progress. The global industrial space of phenyl silicone monomer is about 5% of methyl silicone monomer, which is close to 100,000 tons. It has a larger industry prospect and better profitability.

Pacific recommends paying attention to Jitai shares. Reasons for recommendation: the company released the third quarter report for 2020: the reporting period achieved operating income of 830 million yuan, +14.79% year-on-year; net profit attributable to the parent company was 94 million yuan, +67.24% year-on-year. The company has been deeply involved in the silicone sealant industry, with mergers and acquisitions and fixed increase in production. The volume is expected to double, benefiting from the growth of downstream demand and the increase in industry concentration, the performance continues to improve, and it is assigned a "buy" rating.

Northeast Securities recommends paying attention to Xin'an shares. Reasons for recommendation: The organic silicon boom has rebounded and the performance is expected to continue. The company's Q3 epoxy siloxane, siloxane intermediates, silicone rubber sales and special monomers were 20,600 tons, 16,400 tons, 18,900 tons and 4,200 tons, respectively. Since August, the downstream demand for organic silicon has been strong, mainly due to the transfer of orders from India and domestic demand on Double Eleven, and the increase in demand for textile auxiliaries promotes the increase in demand for organic silicon; overseas high-temperature adhesives have reduced production due to the epidemic, and orders have been transferred to China. At present, the company's PB is only 1.1 times, which is safe enough. At the same time, the bottom of the product price is bullish, giving a "buy" rating.