Hualu Hengsheng's first quarter results are expected to exceed expectations

After the holiday, demand is strong and the price of urea rises: After the Spring Festival, the weather becomes warmer, agricultural demand starts to start, and the price of urea is trending upward.
From a long-term perspective, the slowdown of overseas production capacity and the promotion of domestic capacity reduction, the growth rate of production capacity in the next three years will be lower than the growth rate of global demand, and the global supply and demand balance of urea is changing.
In 2017, my country's total urea production dropped sharply to 56.
55 million tons, a decrease of nearly 12 million tons compared with 2016.
The supply gap is gradually emerging.
In the short term, the shortage of output has accelerated the destocking of urea.
At present, total social stocks and port stocks are in a historical position, down 25% and 53% from the same period last year.
Low stocks are combined with peak seasons, and urea prices are rising.
Hualu Hengsheng has a production capacity of 1.
8 million tons of urea, corresponding to a price increase of 100 yuan/ton for urea, and an increase in EPS of 0.
05 yuan.
The prices of adipic acid and acetic acid have risen sharply, and the company's performance has great flexibility: the company has an existing adipic acid production capacity of 160,000 tons and an acetic acid production capacity of 500,000 tons.
Benefiting from rising oil prices, strong upstream hydrogenated benzene prices, and higher downstream PA66 operating rates, the price of adipic acid continues to pick up.
The current ex-factory price of the company is reported at 13,600 yuan/ton, and the average price of adipic acid from January to February 2018 was 13,160 yuan/ton.
Tons, an increase of 23% compared with the fourth quarter of 2017.
Recently, BASF, Celanese and other manufacturers announced to increase the price of PA66 by 500-1000 yuan/ton.
The boost in the downstream is expected to stimulate the price of adipic acid to continue to rise.
Benefiting from the increase in external demand brought about by the shutdown of overseas acetic acid production capacity and the increase in PTA operating rates, the domestic demand has been strong.
The price of acetic acid has risen rapidly since September 2017.
The ex-factory price has risen from 2,800 yuan/ton to 4,700 yuan/ton, due to overseas acetic acid Most of the devices have been in service for a long time, and there is almost no new domestic production capacity in the short-term.
The supply and demand pattern of acetic acid continues to improve, and the profit margin is greatly increased.
Every time the prices of adipic acid and acetic acid increase by 1,000 yuan/ton, the company’s corresponding EPS elasticities are 0.
07 yuan and 0.
22 yuan.
Coal-to-ethylene glycol has been approved by polyester manufacturers.
The production capacity of 500,000 tons/year is expected to be put into operation in the third quarter, fully benefiting from the broad space for import substitution: The company's 50,000 tons/year coal-to-ethylene glycol project continues to produce stable and full-load products.
The quality has been recognized by downstream polyester polyester manufacturers.
At present, the 500,000 tons/year ethylene glycol project has entered the equipment installation period.
Based on the experience accumulated in the previous project, it is expected to be put into production in the third quarter and achieve full capacity operation within two months.
Domestic installations are still dominated by naphtha ethylene routes.
Therefore, when the crude oil price is higher than 60 US dollars/barrel, coal-to-ethylene glycol has a prominent cost advantage and profitability is supported.
In 2017, my country's ethylene glycol demand was 14.
4 million tons, the import dependence was nearly 60%, and the import substitution space was nearly 9 million tons.
The company may continue to expand production after the 500,000 tons/year coal-to-ethylene glycol project runs smoothly.
Profit forecast and valuation.
Relying on low-cost synthesis gas, the company has formed a diversified product structure such as methanol, synthetic ammonia, urea, acetic acid, and ethylene glycol, with obvious competitive advantages.
Projects such as ethylene glycol are expected to open up the company's growth space.
Maintain the profit forecast and overweight rating.
It is estimated that the EPS will be 0.
79, 1.
13, and 1.
39 yuan in 2017-19, and the corresponding PE will be 22, 16, and 13 times.