Huarong Securities: Spandex Prices Rose To Date.

Attending the fifth spandex market and development forum held in Xiaoshan, Hangzhou on September 16th -17.

The price of spandex 40D is about 510 million yuan / ton before the price increase. If the quotation is raised to 540 million yuan / ton, the increase will be around 6%.

According to the latest price in the market, the market price of spandex 40D has risen to 52500 yuan / ton.

We believe that the overall price increase of the spandex industry should be expected.

Spandex production listed companies grew significantly in the first half of the year

In the first half of this year, the significant increase in operating income and net profit of the spandex production listed companies was mainly due to the booming demand for Spandex Products and the increase in sales of Spandex Products. Meanwhile, with the rising demand, the price of spandex products continued to rise in the second half of last year. In the first half of May, the average price of spandex was still higher than that of the same period of last year.

Investment rating

Risk warning

The risk of falling price of spandex prices; the risk of substantial increase in raw material prices; and the risk of increased competition in the industry.

First, the price of spandex is rising "as scheduled".

According to the securities times, the spandex market and development forum held in Xiaoshan, Hangzhou, on September 16th -17, reached the price increase agreement. The price of the Spandex Products (including 20D, 30D and 40D specifications spandex) will be raised by 3000 yuan / ton. After adjustment, the price of spandex 20D is expected to reach 76000 yuan / ton, the price of spandex 30D is expected to reach 65000 yuan / ton, and the price of spandex 40D is expected to reach 54000 yuan / ton.

The price of spandex 40D is about 510 million yuan / ton before the price increase. If the quotation is raised to 540 million yuan / ton, the increase will be around 6%.

According to the latest price in the market, the market price of spandex 40D has risen to 52500 yuan / ton.

Since the beginning of this year, the spandex industry has made two overall price increases, of which the spandex 40D price in January has been raised by 3000 yuan / ton to 510 million yuan / ton.

In April, the Spandex Industry Association reunified the price to increase 2000-3000 yuan / ton, spandex 40D price once rose to 57000 yuan / ton, spandex 20D price once rose to 83000 yuan / ton.

But spandex prices have dropped since May.

As of last week, spandex prices have dropped to the level of January this year.

We believe that the overall price increase of the spandex industry should be expected. First, as the demand for textile and garment industry in the lower reaches increases, the demand for spandex industry has increased in summer compared with that in summer. The two is that the price of spandex raw materials continues to rise in the early stage of the decline of spandex prices, which provides a strong support for spandex prices.

The spandex price increase or will open a new round of spandex prices overall rise.

1. downstream demand revival

At present, the downstream textile industry of polyurethane fiber has entered the peak season. The demand for spandex in Guangdong, Fujian and Zhejiang is on the rise.

At the same time, due to the power restriction and shutdown in some provinces, the operation rate of the spandex industry has dropped slightly.

With the increase of demand and relative reduction of supply, the inventory of spandex production enterprises has begun to decrease.

In terms of exports, the export situation in China is still improving. In September 10th, the General Administration of Customs issued the statistics of import and export in August. Data show that in 1-8 months of this year, the total value of China's exports amounted to US $989 billion 739 million, representing an increase of 35.5% over the same period last year.

Among them, textile yarn, fabrics and products in 1-8 months this year, the total amount of export amounted to US $49 billion 515 million, an increase of 32.3% over the same period, and the total export amount of garments and accessories reached US $80 billion 289 million, representing an increase of 19% over the same period last year.

The further improvement of external demand for textile and garment products also provides a strong pulling effect on the price increase of Spandex Products.

Traditionally, the fourth quarter will be a small peak for textile exports, and the demand for spandex will continue to grow steadily in the future.

2. raw material cost support

According to the analysis of spandex production cost, the main raw materials of spandex products are pure MDI (two phenyl methane diisocyanate, isocyanate) and PTMEG (polytetrahydrofuran glycol).

In terms of dosage, the amount of PTMEG used in each spandex is about 80%, and the pure MDI occupies about 20%.

From the perspective of cost accounting, PTMEG accounts for about 50% of total production cost, while pure MDI accounts for about 10% of total production cost.

In the two quarter of this year, the PTMEG price of the domestic market (the Yangtze River Delta) rose sharply, and the price rose from 21000 yuan / ton to 27000 yuan / ton, or nearly 30%.

Although the price of MDI has dropped somewhat in the early stage, it has begun to show an upward trend.

Therefore, with the support of the rising cost of raw materials, the price rise of spandex is also in line with expectations.

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Two, spandex production listed companies in the first half of a substantial increase in performance

1. significant increase in performance

Spandex production related listed companies are mainly three: Yantai spandex (002254), Huafeng spandex (002064) and Yu Li Holdings (000584).

Yantai spandex report shows that in the first half of this year, the company achieved a total revenue of 706 million yuan, an increase of 37.4% over the same period last year, and realized a profit of 183 million yuan, an increase of 487% over the same period last year, and realized a total profit of 183 million yuan, an increase of 361% over the same period last year. The net profit attributable to shareholders of listed companies was 142 million yuan, up 389% over the same period last year, and the basic earnings per share were 0.55 yuan.

In the first half of this year, the company realized operating income of 825 million yuan, an increase of 60.29% over the first half of this year, and realized a profit of 203 million yuan, an increase of 23940% compared with the same period last year. The total profit was 210 million yuan, an increase of 2002% over the same period last year. The net profit of the shareholders attributable to the listed company was 178 million yuan, up 2002% over the same period last year, and the basic earnings per share were 0.24 yuan.

In the first half of this year, the company achieved a total revenue of 638 million yuan, an increase of 64.07% over the first half of this year, a profit of 94 million 402 thousand yuan, an increase of 1814% over the first half of this year, a total profit of 94 million 544 thousand yuan, an increase of 1935% over the first half of the year, and a net profit of 60 million 482 thousand yuan attributable to shareholders of listed companies, an increase of 1316% over the same period; and a basic earnings per share of 0.148 yuan.

The substantial increase in operating income and net profit of the spandex production company was mainly due to the strong demand for Spandex Products and the increase in sales of Spandex Products. Meanwhile, with the rising demand, the price of spandex products continued to rise in the second half of last year. In the first half of May, the average price of spandex was still higher than that of the same period of last year.

2. rapid recovery of export business

As mentioned earlier, the export situation in China is still improving, and the overseas orders of spandex production enterprises have also increased considerably.

From the data released by the listed companies in the first half of this year, the revenue growth of the corresponding company's export business is higher than that of the domestic business revenue in the same period.

Traditionally, the small peak of textile exports in the fourth quarter of the year will bring more income growth to the corresponding enterprises.

Only three of the spandex listed companies are mainly domestic market, and basically have no foreign sales revenue.

Three, investment rating

In the three spandex production listed companies, we are most optimistic about Yantai spandex.

At present, the company has spandex production capacity of 22 thousand tons / year, Aramid 1313 production capacity of 4300 tons / year (this year after technical improvement to 4600 tons / year).

The projects under construction include: (1) the 5000 tons of medical spandex production line is in the process of construction, and is expected to be put into operation before October 2010; (2) the 7000 ton comfortable spandex fiber project of the company is planned to start construction in April 2010 and put into operation at the end of June 2011; (3) the 1000 ton industrial aramid 1414 project has been launched, and the project is expected to complete the equipment installation by the end of 2010, and will start trial operation at the beginning of 2011.

The company's unique aramid business will bring more room for development.

We expect the company's EPS in the 2010-2012 year to be 1.04 yuan, 1.28 yuan and 1.40 yuan respectively, and the corresponding dynamic price earnings ratio is 26 times, 21 times and 19 times respectively, with the closing price of September 17th 26.91 yuan, so as to maintain the company's "highly recommended" investment rating.

In addition, Huafeng spandex is specialized in the development, production and sale of spandex fiber. It is the largest spandex fiber manufacturing enterprise in the country.

The company currently has 42 thousand tons of spandex annual capacity (excluding construction projects), has 48 production lines, ranking first in the country, ranking third in the world, and has a prominent scale advantage.

We expect the company's 2010-2012 years EPS to be 0.44 yuan, 0.57 yuan and 0.66 yuan respectively, and the corresponding dynamic price earnings ratio is 25 times, 19 times and 17 times respectively, with the closing price of September 17th 10.91 yuan, so as to maintain the company's "recommended" investment rating.

Four, risk warning

The risk of reducing the price of spandex.

The risk of substantial increase in raw material prices;

The risk of increasing competition in the industry.