According to reports, in the past two months in April, due to the continuous increase in the comprehensive cost of gas-phase white carbon black, 107 glue, etc., many downstream silicone rubber enterprises in East China and South China announced a price increase of about 5% from April 20. The industry believes that, unlike in previous years, corporate prices have raised the price hikes and raw material prices up to the same pace, thus avoiding the pressure of excessive raw material costs. With the arrival of the peak season, the strong demand for terminals also provides space for companies to raise prices. The traditional gold, three silver and four are coming, the market demand is strong, and it is expected that the trend of rising prices will continue. Related companies include Silicon Bao Technology, Hesheng Silicon, and Xin'an.


Silicone concept stocks at a glance


Xin'an shares: performance declines, expecting real estate to pick up


Xin'an shares 600596


Research institute: Zhongtai Securities Analyst: Shang Aihua Date of writing: 2019-01-18


Event: The company released a pre-announcement of results. It is estimated that the net profit for the whole year will be 1.220 billion yuan to 1.30 billion yuan in 2018, an increase of 687 million yuan to 767 million yuan from the same period of last year, an increase of 129% to 144%.


Product prices and spreads both fell sharply, and the performance of 18Q4 companies fell sharply. According to the company's announcement, 2018Q4 achieved a net profit of RMB 54 million to RMB 134 million; 2018Q1-Q3, the net profit of the company was 2.59/4.52/45 million, respectively. Compared with the performance of 18Q3, the company's performance fell sharply. The main reason is that due to the sluggish demand side, the price of many products of the company has fallen sharply, and the price gap has been severely narrowed. According to wi nd information, 18Q4, the company's average price of silicone intermediates was 23,408 yuan / ton (down by 9695 yuan / ton), the average price of 107 glue was 23,690 yuan / ton (down by 11,435 yuan / ton), mixed rubber The price was 25,923 yuan / ton (down 7576 yuan / ton), the average price of silicone oil was 25,228 yuan / ton (down 1,305 yuan / ton) and the average price of glyphosate was 28,172 yuan / ton (up 288 yuan / ton from the previous month) . In addition, the company's profit share of the highest proportion of silicone intermediate products in the 18Q4 sharply narrowed, 2018Q4 spread of 11,298 yuan / ton (down by 10,264 yuan / ton), product prices and spreads led to the company's profitability.


The silicone boom is going down, waiting for the real estate to pick up. In 2018, the organic silicon industry showed the characteristics of “first rise and then fall”. In the first half of the year, the industry was booming, and the second half of the year saw a sharp decline. 2018H2, the main reasons for the sharp downturn in the industry are as follows: (1) Cost collapse: The main raw materials for silicone intermediates are metal silicon and methanol. In the second half of 2018, due to the weakening of the oil price, the demand for methanol has weakened, resulting in methanol. The price plummeted, falling from the highest point of nearly 3,600 yuan / ton to nearly 2,400 yuan / ton, down nearly 33%. In addition, due to seasonal fluctuations and falling demand for metal silicon, the same price plummeted, falling from 14,900 yuan/ton at the beginning of the year to the current 12,800 yuan/ton, a drop of 14.1%. The downward cost led to weaker support for silicone costs; 2) The demand in the peak season is weak: due to the high correlation between the downstream application of the silicone terminal and the real estate completion area, the housing completion area of China from January to November 2018 was 669 million square meters, down 12.3% year-on-year. The decline in the completion area has led to weaker demand for room temperature adhesives downstream of silicones, resulting in less-than-expected demand in the peak season in the third quarter, resulting in price pressure; (3) continuous high start of supply: from the supply side of silicone, according to Chuang Information, with a production capacity of 2.3 million tons in 2018, has a capacity utilization rate of 74%, an increase of nearly 10 percentage points from 2017. Due to the high profitability of the industry in the past, the industry's capacity utilization rate was high, and high production started to lead to higher output growth. In 2019, it is necessary to hope for a recovery in the growth rate of the terminal real estate completion area. From the current supply and demand pattern of organic silicon, the supply end is still passivated, mainly reflected in the fluctuation of the operating rate, while the demand side needs to wait for the growth rate of the real estate completion area to rise. (1) Supply end: The passivation state of the supply end is still there. In the first three quarters of 2019, there was no new capacity in the industry (Xin'an 150,000 tons is expected to be put into operation in 19Q4). The fluctuation of industry supply is mainly reflected in the flexibility of the operating rate. Currently, due to the poor overall profit of the industry, the operating rate of the industry is down, 18 years and 12 years. The effective monthly operating rate was only 82%, which was nearly 13 percentage points lower than the highest operating rate in 18 years. If the industry's profitability is getting better, the operating rate may be improved. (2) Demand side: It is the source of price increase. At present, China's real estate completion area deviates from the newly started area. The new construction area is increasing and the completion area is growing at a low rate. According to historical experience, the deviation time period is about 24 months, and the completion area growth rate may be warmed up in the second half of 19, when it is superimposed. During the peak demand season, the demand side may be upgraded. Therefore, in the current situation that the price of organic silicon has fallen to near the cost line, we expect the demand to pick up or boost the price of silicone under supply passivation. The company's leading position may be further enhanced. The company is China's second largest silicone monomer enterprise and one of the largest herbicide glyphosate production enterprises. It has a glyphosate production capacity of 80,000 tons and a silicone monomer production capacity of 340,000 tons, equivalent to DMC's equity production capacity of 145,000 tons. The company integrates two wings, the advantages of chlorine cycle integration are obvious, and the production cost is effectively reduced; the proportion of downstream deep processing products of silicone is continuously increased, and the added value of products is continuously improved; in addition, the production capacity of 150,000 tons will be expanded in 2019, and the leading position will be further improved. The performance elasticity is expected to expand further.


Earnings forecast and investment suggestion: We expect the company's net profit attributable to the parent company to be 12.59, 5.71, 825 million yuan from 2018 to 2020, an increase of 136.39%, -54.67%, and 44.43%; corresponding EPS is 1.79, 0.81, 1.17 yuan Corresponding PEs are 6 times, 13 times and 9 times respectively.


Risk warning events: the risk of a sharp downside in product prices, and the risk of project launching not meeting expectations.