Zhejiang Longsheng (600352): Performance Is In Line With Expectations, And Dye Prices Remain High.

Zhejiang Longsheng performance is in line with expectations.

We believe that environmental protection will not change, and dye prices will remain high.

On the other hand, the market share of intermediates increased, and the volume and price of products rose.

Maintain buy rating.

The key points of supporting ratings are in line with expectations.

The company issued a notice of earnings growth, and expects net profit of 4 billion to 4 billion 200 million yuan attributable to shareholders of Listed Companies in 2018, an increase of 61.69% to 69.78% over the same period last year.

The net profit after deduction is 3 billion 700 million yuan to 3 billion 900 million yuan, an increase of 102.41% to 113.35% over the same period.

In the single quarter, the net profit of net profit in the fourth quarter of 2018 was 821 million yuan to 1 billion 21 million yuan, 623 million yuan to 823 million yuan after deduction.

Performance is in line with expectations.

Environmental protection has not changed, and dye prices remain high.

In 2018, the situation of environmental protection was severe, and environmental protection incidents in Northern Jiangsu continued to ferment, and many chemical enterprises along the Changjiang River closed down and moved.

Judging from the dyestuff industry, although individual large and medium-sized enterprises have gradually resumed production after rectification, the rate of commencement of industry has not been significantly improved.

According to the "seven color cloud business" released in December 2018, the black ECT market average price of 34-35 yuan / kg, the active black WNN market average price of 25-26 yuan / kg, although the price is still high in the callback, and the recent price rise again.

We believe that most of the small enterprises that fail to meet the standards will withdraw from the industry completely. In 2019, the dye industry is still in a tight state of supply, and the price of dye will remain high.

As a leader, the company is fully benefited.

Resorcinol and other intermediates contributed significantly to the increase in performance.

In the fourth quarter, the price of resorcinol has dropped, but it is still very high in history.

According to the online statistics of chemical industry, the average market price of resorcinol in the fourth quarter of 2018 was 97 thousand / ton, up sharply from the same period last year.

On the other hand, intermediates such as benzene, two amine and so on remain high.

At present, the company has 30 thousand tons of resorcinol production capacity and 65 thousand tons of inter amine two amine production capacity. This intermediate price increase has brought the company a larger performance increment.

The main risks facing the rating are easing environmental policy and fluctuating prices.

The valuation temporarily maintained the 2019 profit forecast, due to a slight decline in the four quarter of 2018, and a slight reduction in 2018 profit forecasts. The 2018-2019 year earnings per share were 1.29 yuan and 1.28 yuan respectively.

The current stock price corresponding to P / E is 7.4 and 7.4 times, to maintain the buy rating.