(002440) 2018 Annual Report and 2019 First Quarterly Report Comment: Dye prices are steadily rising and optimistic about supply and demand continues to optimize

(002440) 2018 Annual Report and 2019 First Quarterly Report Comment: Dye prices are steadily rising and optimistic about supply and demand continues to optimize
Benefiting from the increase in the prices of main products, the company’s 2018 net profit grew steadily.We are optimistic that the small-capacity industry in the industry will be gradually cleared by the security incident in northern Jiangsu, and the supply and demand layout will continue to be optimized; the company’s production capacity will expand in an orderly manner and its profitability 北京桑拿会所 will continue to increase.The company’s EPS for 2019-21 is predicted to be 1.68/2.06/2.30 yuan, raise target price to 20 yuan, maintain “Buy” rating. Net profit has grown steadily in 18 years, and significant cost growth has dragged down 19Q1 results.Benefiting from the rise in main product prices in 18 years, the company achieved revenue of US $ 6.4 billion, a year-on-year increase of 7%; and achieved net profit attributable to mothers12.800 million, ten years + 36%.In 1Q1, due to the increase in raw material prices, the company’s performance was dragged down, and its operating income reached 1.8 billion US dollars, an annual increase of 13%; net profit attributable to mothers was realized2.6 yuan, at least -15%. The impact of the security incident in northern Jiangsu lasts, and the prices of its main products are expected to rise steadily.After the Xiangshui explosion in northern Jiangsu, the prices of m-phenylenediamine and disperse dyes have both increased rapidly.As the downstream printing and dyeing industry’s starting load declines, the off-season of the industry is about to come. We expect the product prices to stabilize in the off-season in May and June. After the coming of the subsequent peak season, the product prices once again welcome growth. The industry’s small capacity is gradually cleared, and the supply and demand pattern continues to be optimized.Dye production capacity will be limited in the future. With the start of environmental protection in northern Jiangsu, some small-scale production capacity will be gradually phased out, and the industry’s supply structure will continue to be optimized. Although the demand side has experienced a short and rapid increase in prices, it has affected downstream demand to a certain extent.However, dyes are just needed for downstream clothing and the cost ratio is extremely low. Against the background of the decline in downstream inventory, demand is expected to pick up again; then the price elasticity of dye products will promote display. The scale of production capacity increased, and profitability increased.The company’s total production capacity is nearly 19 pounds, including 11 for disperse dyes, 6 for reactive dyes, and 2 for other dyes. The sales market share of the products ranks first in the domestic dye market.In May this year, the company’s preliminary reactive dyes project is expected to be put into production, providing a basis for the company’s performance growth and optimistic about the company’s long-term development under the high industry boom. Risk factors: Uncertainty in trade friction; product demand has dropped sharply; the company’s new production capacity has fallen short of expectations. Investment suggestion: As the security incident in northern Jiangsu drives product prices higher than expected, raise the company’s 2019-20-20 net profit forecast to 19.33/23.68 ppm (previous forecast was 15.47/16.97 ppm), plus a return to net motherhood profit forecast for 2021 of 26.45 million, 北京桑拿洗浴保健 corresponding to 1 for 2019-21 EPS.68/2.06/2.30 yuan.Taking into account the long-term performance growth brought by the dye industry to maintain a high business climate and capacity expansion, the company was given 12 times PE in 2019, raised its target price to 20 yuan (the original target price was 16 yuan) and maintained a “buy” rating.