Leading enterprise in domestic TFT liquid crystal material market

Transcription

1 13 December Research Report Company Research Mid and Small Cap Yantai Valiant Fine Chemicals (002643) New Issuance Pricing Report Leading enterprise in domestic TFT liquid crystal material market Initial Coverage Offering price: Rmb 25 Fair valuation range: Rmb28~30 Highlights Leading enterprise in domestic liquid crystal material market. The company s main products are the liquid crystal intermediates used for synthesis of liquid crystal monomer, and the liquid crystal monomer used for producing mixed liquid crystal. The company is the only supplier in China who provides TFT liquid crystal materials in long term simultaneously to the three major global TFT mixed liquid crystal producers, namely Merck, Chisso and DIC. In 2010, the company s sales volume of TFT liquid crystal monomer accounted for around 17 of the whole global market. Downstram TFT-LCD industry enters the stable growth period. According to the research report from DisplaySearch, the global production volume (calculated by the shipment area) of TFT-LCD will enter the stable growth period in -2014, with a CAGR of around 10. As the production of LCD panel maintains a positive relationship with the consumption of liquid crystal monomer, we expect that the global demand for liquid crystal monomer in the next three years will maintain stable growth as well, but lack of potentials for exponential growth. If 10,000 m 2 LCD panel consume around 5 tonnes of liquid crystal monomer, the global demand for liquid crystal monomer in 2014 will come in at around 800 tonnes, representing a market size of almost Rmb5bn, with a CAGR of almost 10 in Profits remain stable. The gross margin of the liquid crystal material industry is relatively high among the industrial chain of liquid crystal module. Altough the raw material costs account for more than 80 of the production costs, the company is able to pass on the rise of upstream raw material prices to the downstream customers, given that its gross margin remains stable at above 30. Capacity will double thanks to the projects financed by proceeds. The company planned to raise Rmb360mn for the investment on the Phase I (400 tonnes) of the capacity expansion project of liquid crystal material (annual capacity: 600 tonnes). The company s annual capacity of liquid crystal monomer and liquid crystal intermediates will increase from 90 tonnes and 120 tonnes by 100 tonnes and 300 tonnes, respectively, after the projects financed with proceeds are put into fully operation. Based on our estimations, the two projects financed with proceeds will contribute Rmb146mn to the net after they are put into fully operation, equivalent to an PS of Rmb1.06. CITIC Securities Research Chuan Tang, CFA Tel: mail: tc@citics.com Practicing license no: S Contact: Guanzhong Wang Tel: mail: wgz@citics.com Offering data Shares to be offered (mn shares) Shares after issuance (mn shares) Offering price (rmb/share) 25 Offering P (10 diluted) 35 Source: CITIC Securities Quantitative Analysis System quity structure after offering S.N. Shareholders 1 Shandong CCP Shares held (10k shares): 4080 Shareholding (): Luyin Shares held (10k shares): 2040 Shareholding (): 14.8 Yantai Supply and Marketing 3 Cooperative Shares held (10k shares): Shareholding (): Luyin Technology Shares held (10k shares): Shareholding (): 5.13 Henan Beyond Huiying Venture 5 Shares held (10k shares): Shareholding (): 2.27 Source: Company s prospectus Please read the disclaimer at the end of the report

2 Potential risks: Slow recovery of global economy; fluctuation of Rmb exchange rate; customers are overly concentrated. arning forecast and valuation range. The company s 2010 PS came in at Rmb0.72, and we predict the company s -13 PS at Rmb0.92/1.25/1.45 (CAGR 26.1). According to Wind, the listed companies related to electronics chemical goods will likely post a 24X P. Given that the company s downstream TFT-LCD industry has entered the stable growth period, we adopted relative valuation method and apply a fair valuation range of Rmb28-30 based on 22X-24X P. Item/Year Turnover (Rmb mn) Growth rate YoY Net (Rmb mn) Growth rate YoY Item/Year Consensus PS(RMB) Gross margin RO P (x) PB (x) V/BITDA Source: CITIC Securities Quantitative Analysis System Note: Stock price is as the offering price. Please read the disclaimer at the end of the report 13 December

3 Income Statement (Rmb mn) Balance sheet ( Rmb mn) revenue ,079 1,263 Cash and cash equivalents cost Inventories Gross Account margin receivables Business tax Other current and surcharges Current Assets-Total Property, plant and equ Administrative Long-term equity investment Administrative Financial Financial profit profit margin Non-operating Non-operating Intangible asset Other long-term Non-Current Assets- Total Total Assets ,440 1,615 1, Pre-tax profits Income tax Income tax rate Minority interests Net profit attributable to parent company's shareholders Net margin Interest-bearing bank loans Account payables Other current Current liability-total Long-term Other non-current Non-current Total Total Liabilities Issued Capital Cash flow statement (Rmb mn) Reserves ,132 1,263 1,415 Common quity ,270 1,401 1,552 Minority interest Total Liabilities &quities ,440 1,615 1,794 Pre-tax profit Key Income tax paid Consolidated Gross Margin Depreciation & amortization revenue Changes in working capital Others Net cash Income flow margin() Capital expenditure Gross margin() BIT Margin Please read the disclaimer at the end of the report 12 December

4 Disposal of BITDA Margin Others Net margin Cash flow from investments Returns () quity issuance RO Changes in ROA Dividends payout Others() Other Liability asset ratio Financing cash flow Income tax ratio Net increase of Dividend payout cash and cash ratio equivalent Source: CITIC Securities Quantitative Analysis System Please read the disclaimer at the end of the report 12 December

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