Zhejiang Longsheng (600352): 18-year results are in line with expectations Focus on dyes and intermediate business


Zhejiang Longsheng (600352): 18-year results are in line with expectations Focus on dyes and intermediate business

The company released the 2018 annual report, and the performance was in line with expectations: in 2018, it achieved operating income of 190.

8 billion (+26.

3%), realizing net profit attributable to mother 41.

100 million (+66.

2%), the main reason for the rapid growth in performance was the rise in dye prices and the rise in the volume and price of core products.

By quarter, 18Q1?
The net profit attributable to the parent company of Q4 was 7, respectively.

8/10.

8/13.

2/9.

300 million, a month-on-month growth rate of 29.

1% / 39.

3% / 22.

1% /-29.

4%, of which Q4 performance over the previous quarter was mainly due to the decline in sales and average price of dyes and intermediate products.

  The Xiangshui accident continues to ferment, and the price of dyes is expected to remain high: Against the backdrop of the severe environmental protection trend of the country, the dye industry maintained a high boom in 2018, and the company’s dye business achieved revenue 111.

0 billion (+21.

5%), sales of 24.

2 benchmarks (-1.

7%), the average price of products excluding tax4.

60,000 / ton (+23.

5%), with a gross profit margin of 47.

8% (+8.

9 pct).

In addition, the recent major accidents in the Xiangshui Chemical Park have continued to ferment, the supply of dyes and neutral substances has been affected, and product prices have risen rapidly, according to the colorful 北京夜网 cloud e-commerce report until 2019.

4.

2. The ex-factory price of scattered blacks of some enterprises has increased to 60,000 / ton (earlier +42.

9%).

We expect that this major accident may lead to a new round of environmental protection and safety improvement, which will cause most of the small and medium-sized backward production capacity to completely withdraw from the industry.

With tight supply in the future, dye prices are expected to continue to remain high, and the company as a domestic leader may fully benefit.

  The middle has become an important part of the company’s profitability: the company’s intermediate business has accumulated 15 years of transformation, and its core products, m-phenylenediamine, and resorcinol, have become industry leaders.

(1) M-phenylenediamine: The Xiangshui incident caused Tianjiayi Chemical, the second largest m-phenylenediamine enterprise in China (capacity 1.

(July) exit, according to dyeing circle information, until 2019.

4.

1. Product quotations jumped from 50,000 / ton before the accident to 150,000 / ton. The company is the domestic leader in m-phenylenediamine (capacity 6).

5 Aim) Make full use of; (2) Resorcinol: After the withdrawal of overseas INDSPEC production capacity in 17 years, the only major global companies left are companies and Sumitomo, and product prices have reached a new level. According to wind information, the average 18-year spotPrice 10.

30,000 / ton (+56.

2%).
Recently, through the shortage of m-phenylenediamine and the continued imposition of anti-dumping duties on Japanese and American products, product prices have remained high, and performance can be expected to increase.
  As a domestic dye and intermediate leading enterprise, the company has built a strong moat through the advantages of scale, technology, environmental protection and safe production, as well as the integration of the industrial chain.

Due to rising product prices, we have raised our forecast for 2019-20 and added a profit forecast for 2021. It is expected that EPS for 19-21 will be 1.

75/1.

87/2.

00 yuan, corresponding to 19-21 years PE is 10.

8/10.

1/9.

4x, maintaining the “Buy Level”.

  Risk Warning: Dye or intermediate price fluctuation risk, downstream demand is less than expected, environmental protection and safety production risk