Focus on subdividing the track to create functional material faucet

Company is a leading enterprise of electronic chemicals and functional materials in the world. Its products mainly include lithium battery chemicals, capacitor chemicals, organic fluorine chemicals, semiconductor chemicals and so on. From 2009 to now, the company's revenue has increased by 27% annually, and its net profit has increased by 30% annually. Concentric circle expanding variety with distinct advantages in subdivision field

Focusing on core technology, the company has created four product lines of capacitor chemicals, lithium battery chemicals, fluorine fine chemicals and semiconductor chemicals, and has become the leader in subdivision field. Capacitor Chemicals: The company's global share is expected to exceed 20%, and its domestic share will exceed 40%, leading by a long way. The rapid growth of automotive electronics and Internet of Things promotes the demand for aluminium capacitors to rebound, environmental protection improvements promote industry integration, and capacitor chemicals will continue to grow steadily in the future; lithium battery electrolyte: electric vehicles drive the demand for lithium battery electrolyte to maintain an average annual growth of 40%. After shuffling, the industry has formed an oligopoly structure, and the share of CR6 has reached 72%. We believe that electrolyte profits have reached the bottom and are expected to rebound. The company's domestic share is the second (15.4%). The acquisition of BASF electrolyte business further widens the technological gap with domestic rivals. The capacity of electrolyte under construction is 70,000 tons, which is 17.5% higher than that of the same year. Fluorine fine chemicals: China has a serious overcapacity of low-end products of fluorine chemical industry, while high-end products related to strategic emerging industries are heavily dependent on imports. The company's hexafluoropropylene oxide production capacity is the largest in the world, and extends to a number of high value-added products, the net interest rate continued to maintain at 30% - 40%. The company intends to invest 1 billion yuan to build 15,000 tons of high-performance fluorine materials, especially perfluorosulfonic acid resins and PFA products, which are monopolized by foreign giants with high technical barriers and added value. The company predicts that the first phase project will contribute 882 million yuan of income and 167 million yuan of net profit after production. Semiconductor Chemicals: Electronic Chemicals are the key raw materials of semiconductor industry, the development of domestic industry is seriously lagging behind, and the localization rate is less than 8%. After years of research and development, our products have been supplied in batches to Huaxing Optoelectronics, Kunshan Guoxian and other panel enterprises. The quality of ultra-pure ammonia water and hydrogen peroxide water has met the needs of high-end customers such as TSMC and Zhongxin International. Previous R&D investment is large, and the volume takes time. At present, the gross profit rate is only 17% lower than that of comparable companies. With the development of downstream customers and new production capacity, the revenue and profitability of semiconductor chemicals business are expected to increase rapidly.

Large-scale investment is about to enter a new round of rapid growth period. Eighteen years to date, the company has launched a number of investment projects, with a total investment of 2.02 billion yuan. In the next 2-3 years, the project will gradually enter the commissioning period. The company estimates that it can contribute 500 million yuan net profit after production, which is 156% higher than the 18-year net profit. The company is about to enter a new round of rapid growth period.

Purchase Rating:

Expected EPS of the company from 2019 to 2021 is 0.9/1.13/1.45 yuan, and the current price corresponding PE is 26/20.8/16.2 times. Lithium-based materials and electronic chemicals are 29.3/35.5 times the company's average PE in 2019. The company is the leading company in the field of lithium electrical materials and electronic chemicals in China, with reasonable product echelon, stable and sustained performance growth. Since next year, a number of projects have entered the production period, which is expected to enter a new round of rapid growth. The company has entered the supply chain of international giants, and has high R&D strength and industry status. It gives PE 30 times in 2019 with a target price of 27 yuan and a purchase rating.