Excerpts from UOB KH report

Analyst: Clement Ho

Strong Turnaround From Product ASP Spike
Jiutian, which is currently the world’s second-largest DMF manufacturer, is greatly benefitting from an upswing in ASPs.

Jiutian Chemical

Share price: 
9.7 c

Target: 
 16 c

Additionally, depressed costs of methanol, its major raw material, will likely remain low on the back of a weak oil price environment, providing a significant boost to earnings.

We believe investors may have overlooked Jiutian’s earnings potential.

Initiate coverage with BUY and target price of S$0.16.


Strong earnings turnaround since 2Q20. Jiutian Chemical Group’s (Jiutian) earnings hit an inflection point when it reported a strong set of earnings in 2Q20.

Net profit turned around from a loss of Rmb7.0m in 2Q19 to Rmb32.7m (1Q20: Rmb2.9m profit), mainly from the lower price of methanol, its primary raw material.

Gross profit surged 140% yoy to Rmb53.5m, despite a 6% slip in revenue to Rmb276.3m due to lower sales volume of dimethylformamide (DMF).

DMF Jiutian11.20

• DMF’s ASP seeing spike. There has been exceptional demand for DMF, on the back of the strong industrial recovery in China following pandemic lockdowns.

The fine chemical has a diversified range of applications, being a feedstock in the production of polyurethane, pharmaceutical and agro chemical products, as well as a universal industrial solvent that can be used as an absorbing agent.

DMF’s ASP rose from Rmb4,512/tonne in 2Q20 (1Q20: Rmb4,725/tonne) to Rmb5,927/tonne in 3Q20.

As at3 Nov 20, spot price for DMF is hovering at Rmb11,950/tonne.

Demand and selling prices looks to be sustainable. The demand for industrial products manufactured in China looks to be able to continue as other manufacturing nations are still suffering from COVID-19.

Additionally, Zhejiang Jiangshan Chemical, the second-largest DMF producer in the world, shut its production facility in May 20, pulling out 180,000 tonnes of annual capacity.

This resulted in a supply shortage for DMF and catapulted Jiutian into the second top spot with its annual capacity of 150,000 tonnes ofDMF.

Initiate coverage with BUY and target price of S$0.16, pegged to 5x 2021F PE, or-1SD of its historical 13-year average.

We have marked the valuation peg below the historical average at 20x, given that the cyclical recovery is still at the onset.

Jiutian currently trades at an attractive 3x 2021F PE, based on a DMF ASP of Rmb7,000/tonne.


Full report here. 

You may also be interested in:


You have no rights to post comments

Counter NameLastChange
AEM Holdings2.380-0.050
Best World2.480-0.010
Boustead Singapore0.945-
Broadway Ind0.133-0.001
China Aviation Oil (S)0.915-0.010
China Sunsine0.400-0.005
ComfortDelGro1.460-0.010
Delfi Limited0.910-0.005
Food Empire1.320-0.010
Fortress Minerals0.310-0.010
Geo Energy Res0.3200.005
Hong Leong Finance2.480-0.010
Hongkong Land (USD)2.870-0.080
InnoTek0.500-0.020
ISDN Holdings0.295-0.005
ISOTeam0.039-0.001
IX Biopharma0.043-0.003
KSH Holdings0.250-
Leader Env0.048-0.001
Ley Choon0.042-0.002
Marco Polo Marine0.068-
Mermaid Maritime0.143-0.002
Nordic Group0.315-
Oxley Holdings0.088-0.001
REX International0.142-0.003
Riverstone0.780-0.025
Southern Alliance Mining0.475-0.010
Straco Corp.0.485-0.010
Sunpower Group0.210-0.005
The Trendlines0.074-
Totm Technologies0.021-0.003
Uni-Asia Group0.810-0.020
Wilmar Intl3.380-0.110
Yangzijiang Shipbldg1.8100.030
 

We have 681 guests and no members online

rss_2 NextInsight - Latest News