CSCI-Stock Connect-Shenma Industry (600810 CH)：Nylon 66 on a roll - 20180312
Nylon 66 on a roll
Nylon 66 prices set on an upward path. Nylon 66, a polyamide widely used in the manufacture of engineering plastics/industrial yarn/textile yarn, has been enjoying a price uptick recently, catalyzed by a broad-based pullback in supply from major overseas suppliers. Looking ahead, we predict more shine on the material as its peak trading period is just after the Spring Festival.
Shenma Industry has presence across the nylon 66 supply chain. Shenma Industry, which is Asia’s No.1 and the world’s No.5 nylon 66 salt producer and China’s largest nylon 66 chips manufacturer, possesses a capacity of 300,000/100,000/69,000/123,000/140,000 tons of nylon 66 salt/nylon 66 chips/adipic acid/HMDA/industrial yarn and tyre fabric.
Impetus for sustained price gains. Just like the previous price hikes seen in MDI, TDI and PC which were sparked and sustained by capacity cutback from overseas monopolies, we believe the recent nylon 66 price uptrend will likely carry on to hit fresh highs, boding well for Shenma Industry.
Expectation of sweetened earnings. A capacity of 69,000/123,000/100,000 tons of adipic acid/HMDA/nylon 66 chips means that for a RMB1,000 per ton increase in product prices, Shenma Industry’s profit and EPS would be boosted by an estimated RMB44mn/79mn/64mn and RMB0.10/0.18/0.14, respectively.
Hence, we predict the company to have net profit attributable to the parent of RMB118mn/427mn/502mn for 2017-2019, corresponding to EPS of RMB0.27/0.97/1.14 and 37x/10x/9x PER. Our target price of RMB14.55 is based on a 15x PER for 2018. Maintain Buy.
Shen Ma Industry is engaged in the manufacture and sales of nylon 66 industrial fibers, nylon 66 gum-dipped curtain cloths, caustic soda and polyvinyl chloride (PVC) resins. Through its subsidiaries, Co. is also engaged in the production and sales of chlorine liquid, electric power and thermal power; manufacture and sales of safety air bag products; mining of salt; and transportation of brine. Co.'s major products include curtain, industry silk, resin and caustic soda.
中信建投国际研究部是中信建投证券香港子公司中信建投国际下属研究部门，负责香港上市公司、行业和宏观研究。我们的研究产品和服务包括行业报告、公司、宏观、常规日报、新闻摘要、分析员路演、上市公司非交易路演和反向路演 以及策略会。
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