Jinfa Technology (600143): Proposed wholly-owned holding Ningbo Haiyue Industry Coordinated Enhancement

Jinfa Technology (600143): Proposed wholly-owned holding Ningbo Haiyue Industry Coordinated Enhancement
It is proposed to acquire 51% equity of Ningbo Haiyue. The wholly-owned Jinfa Technology Co., Ltd. announced on March 4 that it intends to acquire 51% equity of Ningbo Haiyue held by Haiyue Energy in cash at a transaction consideration of 6.990,000 yuan, the source of funds is the company’s own or self-raised funds.Air Force, the company has taken 1 in November 2018.00/0.The USD 76 billion acquisition of 100% equity of Ningbo Yinshang, Ningbo Wanhua Petrochemical, and 佛山桑拿网 indirect holding of 49% equity of Ningbo Haiyue. If the transaction is successfully completed, the listed company will realize a wholly-owned control of Ningbo Haiyue.We expect the company’s EPS for 2018-2020 to be 0.31/0.39/0.48 yuan, maintain “Buy” rating. The acquisition will lay out raw materials such as upstream Ningbo and strengthen the industrial synergy. The company Ningbo Haiyue has exposed 60 PDH, 60 substituted isooctane and 4 substituted methyl ethyl ketone production capacity, along with supporting facilities such as terminals, storage tanks, steam and environmental protection devices.The second phase of the facility will be further extended based on the existing products in the C3, C4 and deep processing industry chain. The related expansion plan has passed the expert evaluation meeting in January 2018 and will be implemented after the final draft.Ningbo Haiyue’s revenue in the first three quarters of 2017/2018 was 56 respectively.3/56.700 million, with a net profit of -2.48/2.2.1 billion.As of September 30, 2018, total assets were 58.500 million, net assets are 6.8.3 billion.According to the announcement of Jinfa Technology, modified polypropylene accounted for nearly 50% of the company’s total product sales in 2017. After the completion of the acquisition, the company will achieve a comprehensive layout of upstream propylene and other raw materials to further enhance industrial synergy. PDH’s profit outlook improves, and the demand for isooctane benefits from the promotion of ethanol gasoline. According to Baichuan Information, the fractional offer in East China was 7,375 yuan / ton at the beginning of March, which has dropped 26% from the peak price in October 18, and the PDH spread has narrowedAbout 20% to 3,500 yuan / ton, but with the overall strength of oil prices, the price broke through and stopped rising, and led to improved profitability of PDH.At the same time, isooctane is used to improve the explosion resistance of gasoline. The main competitor is MTBE.In 2017, the National Development and Reform Commission, the Energy Bureau and other fifteen departments jointly issued a plan that requires full coverage of domestic ethanol gasoline by 2020. Due to the prohibition of MTBE in ethanol gasoline, the demand for isooctane has increased. New materials and products are expected to gradually increase the number of projects under construction. The company expects 3 completely degradable plastic projects, with an annual output of 1 to semi-aromatic polyamide projects, and an annual output of 3,000 tons of thermotropic liquid crystal polymer projects will be put into production in the first half of 2019.We expect the subsequent heavy volume of related products is expected to drive the company’s performance to continue to improve. Maintaining a “Buy” rating is the leader in the domestic modified plastics industry. New products are making good progress, and the supply chain finance business is progressing smoothly. The acquisition will help to increase the company’s performance and enhance industry synergy and performance stability.We expect the company’s 2018-2020 EPS to be 0.31/0.39/0.48 yuan (not considering the impact of this acquisition for the time being), combined with the expected level of comparable companies (average 17 times PE in 2019), considering that the company’s industrial chain supporting facilities are complete, and the projects under construction are making good progress, giving the company 17-20 times PE in 2019, Corresponding to the target price of 6.63-7.80 yuan (the original value is 5.27-6.20 yuan), maintain “Buy” rating. Risk reminder: New business development is less than expected risk, downstream demand reduces risk, and raw material prices fluctuate greatly.