Subbot (603916): Approved convertible bond projects landed to accelerate growth

Subbot (603916): Approved convertible bond projects landed to accelerate growth
Event overview.The company announced that on January 15, 2020, the company received the approval from the China Securities Regulatory Commission to issue the company6.Approval of 9.7 billion convertible corporate bonds.  Capital expansion, project implementation or acceleration.According to the company’s announcement on January 30, 2019, the proceeds from the issuance of convertible bonds6.97 trillion, 3.89/1.38/1.70 billion US dollars were used for the acquisition of Jiangsu Testing Center, Jiangsu’s 62 tons (50 tons of advanced water reducing agent, 10 tons of polyether, 2 tons of other materials) admixture project construction and working capital supplement, of which Jiangsu Testing CenterMay consolidation.We estimate that after the Jiangsu project is put into production, the company’s water-reducing agent / polyether raw material production capacity will increase by 50% / 100%, and due to the approval of the exclusive debt, the project implementation may accelerate, further supporting the company’s growth.  The nationwide layout has been gradually improved, and the cost has been reduced.In addition to the Jiangsu project, the company announced on September 7, 2019 that it will construct a 30-high-performance water-reducing agent and 20 alternative functional material projects in Sichuan to replace the blank of the Southwest Mother Liquor Synthesis Base and further improve the nationwide layout.In the past, because the company’s compounding bases were spread all over the country, the mother liquor synthesis bases were only distributed in Jiangsu, Tianjin, and Xinjiang. The company’s transportation costs (2018: 187 yuan / ton) were about 60-100 yuan / ton higher than the main ones. Sales managementExpense ratio (2018: 14.8%) more than 7 mergers.We believe that after the Sichuan base is put into production, the company’s expense ratio will further decline, so the company’s gross margin advantage will gradually become prominent and the company’s profitability will be enhanced.  The industry is accelerating integration, and 2019 is the prelude to high growth.Due to the increase in the proportion of machine sand (2018: 78%), the downstream customers’ requirements for the performance of concrete admixtures and the requirements for on-site deployment guidance have increased, and the industry’s concentration has accelerated.The current industry CR3 / CR10 is only 9.1% / 19.3% (actual sales volume and revenue caliber), the company’s market share as the industry leader is only 3.7%, there is huge room for improvement in the future.In addition, benefiting from the integration of the testing industry, the company’s testing business is also conducive to stable development and has become a new growth point for the company. The performance growth in 2019 (the performance forecast is attributed to the parent’s net profit and profit growth of 25-35%) is only the company’s high growth cycleprelude.  Investment Advice.Based on more optimistic sales volume and price 苏州夜网论坛 assumptions, the company’s 2019-2021 net profit forecast is raised10.3% / 11.8% / 11.3% to 3.49/4.64/6.13 ppm, an increase of 29 in ten years.9% / 33.2% / 31.9%.Give the company a 2020 net profit forecast of 15x PE estimates and raise its target price by 7.8% to 22.50 yuan (Original: 20.88 yuan), maintain “Buy” rating.  risk warning.Demand is less than expected, costs exceed expectations, testing business development exceeds expectations, and systemic risks.