92% spandex continues to slump

Taihe New Material (002254) 2019 Third Quarterly Report Comments: Net profit attributable to mothers increased by 6.

92% spandex continues to slump

Event: On October 19, 2019, Taihe New Materials released the third quarter report of 2019: the company achieved revenue of 18 in the first three quarters of 2019.

71 ppm, an increase of 19 per year.

19%; net profit attributable to mothers1.

51 ppm, an increase of 6 per year.

92%; estimated average return on net assets increased by 6.

81%, increasing by 0 every year.

07 averages.

Comments: 1. Net profit attributable to mother for the first three quarters of 2019 +6.

92%, in line with expectations in the first three quarters of 2019, achieving net profit attributable to mothers1.

51 ppm, an increase of 6 per year.

92%; of which, in the third quarter of 2019, a single quarter achieved operating income6.

30,000 yuan, +5 for ten years.

1%, net profit attributable to mother 0.

5.7 billion, an increase of 0 every year.

1.6 billion (+39.

32%), an increase of 0 from the previous month.

0.4 billion (+7.

5%).

The company’s performance in the first three quarters of 2019 increased, but the increase rate increased only because the aramid volume and price went up but spandex was affected by increased capacity release and Sino-US trade frictions. The downstream weaving market continued to slump and the spandex price continued to decline.The “Golden Nine” peak season has not been reflected, and the industry is continuing.

Even if the company shifted the focus of production and sales from the Yantai base to the Ningxia base, initially achieving the goal of stabilizing production and reducing costs, but because the production facilities at the Yantai base are relatively old and the products of the Ningxia base are still being promoted, the spandex business is still gradually slowing down performance.

At the same time, the company’s financial expenses for 19Q3 increased 234 annually.

98% (increased bank borrowings and increased interest expenses), asset impairment losses increase by 387 per year.

03% (increased provision for inventory depreciation) also dragged down the high profit brought by aramid.

2. Aramid volume and price are rising, the economy is rising, and the performance continues to grow. The global aramid market size is about 12 tons, of which the meta aramid market size is 4 replacements, and the global para aramid market size is 8 replacements.
At present, the domestic demand for para-aramid is about 1 ton, and the actual production capacity is only 2,000 tons. The para-aramid market has a large gap and high import dependence.

The aramid market has a high degree of biology. Taihe New Materials has long-term supply of high-performance bays (7000 tons capacity) and para-aramid (1500 tons capacity). Among the domestic aramid industry variable leaders, the volume and price of aramid will rise in 2019.The company’s meta-aramid and para-aramid are basically in full production.

In 2018, the company added 6,000 tons / year para-aramid project, 3,000 tons / year high-performance para-aramid project (currently under construction); 2019 added 8,000 tons / year high-performance para-aramid project for protection.
It is planned that the production capacity of para and aramid will reach 1 in the next five years.

2 Baseline (including replacement of old capacity).

Further increase market share.

3. The reshuffle of the spandex industry has continued to accelerate. The expansion of leading enterprises and the withdrawal of small enterprises have been carried out in 2017. The continuous production capacity of the spandex industry has been cleared in 2017. The spandex is still in the consolidation period in 2018-19.

With the implementation of the coal-to-gas policy in the east, coastal companies are facing pressure to withdraw from the city and enter the park.

The company is the first spandex manufacturer in China, and currently has a spandex capacity of 7.

5 nominal.

The company’s five-year spandex plan is planned to form a spandex capacity of 9 nominal exchange rates per year (old 4).杭州桑拿

5 Potential production capacity will be eliminated), and annual sales income of about 30 will be achieved after reaching the production capacity.800 million, with a total profit of about 4.

600 million.

In April 2019, the company announced that its 15,000 ton / year crude denier spandex project and 30,000 ton / year green decomposed spandex project were about to start construction in the third quarter of 2019, and commissioned at the end of December 2020.

It is expected that the company will eliminate the final 4 by the end of 2020.

5 Formaldehyde spandex production capacity, spandex production capacity remains at 7.

5 digits, but costs will be significantly reduced and profitability will increase.

4, the company’s future industrial layout-“dual base” cost difference between the eastern and western parts of the company, the company readjusted the industrial layout.

The company established Ningxia Taihe, a subsidiary in Ningdong, and completed the acquisition of the spandex business of Yuehua New Materials. It is currently in the product promotion stage and mainly produces large batches of products.

In response to a series of changes in the spandex industry, the company plans to implement dual-base construction, requisition land in the chemical park in Yantai Development Zone, aim at the world-class level, implement new park construction, and build a new level 3 high value-added decomposed spandex project to promote differencesImprove the efficiency of chemical products, scale up, and increase efficiency.

5. Investment rating and estimation: It is estimated that the net profit attributable to the mother in 2019/20/21 will be 2 respectively.

15/3.

21/4.

2.3 billion, PE is 29.

57/19.

85/15.

06 times, give “recommended” rating.

6. Risk reminder: the price of spandex products fluctuates; the operating costs rise; the risk of acquisition of asset integration.