Since the beginning of this year, the concept of A-share PEEK has been repeatedly active, and today the PEEK sector rose 4.93%, the largest increase in the market. Today, we will briefly sort out the investment ideas, industry pattern and fundamentals of core stocks of the A-share PEEK concept.
1. PEEK material: the king of resins
PEEK is a special engineering plastic. With excellent heat resistance, excellent mechanical properties, good corrosion resistance, easy processing, biocompatibility and other characteristics, PEEK is recognized as one of the world's best-performing thermoplastic materials. It is known as the "pearl" in the field of engineering plastics.
2. Market analysis
In 1978, the British Imperial Chemical Company (ICI) pioneered PEEK material, which has become a strategic material for a long time. The production capacity of PEEK has been maintained at 400 tons per year for a long time, and it is mainly used in special fields in the early days, and is now widely used in electronics, automobiles, aerospace, military and medical fields.
In 2022, the global/continental PEEK consumption will be about 7556/2334 tons, and it is expected to reach 12929/4358 tons in 2027, with a CAGR of +11.38%/+13.30%. On the supply side, the top three manufacturers account for 80% of the world's production capacity, and all of them are foreign companies.
Under the trend of lightweight, PEEK material is expected to replace steel with plastic, and become the core material in structural parts in multiple terminal fields such as automotive industry + 3D printing + robotics + electronic and electrical + aerospace + medical, especially in the two hottest industries in the near future: humanoid robots and flying cars, making PEEK the direction of market speculation.
3. Core materials for humanoid robots
Compared with other engineering plastics, PEEK has both rigidity and toughness, and ranks among the top in terms of heat resistance, wear resistance and corrosion resistance. The density of pure PEEK resin is lower than that of carbon fiber material, and it is easy to process into various forms of parts, and the mechanical strength, friction resistance and wear resistance of PEEK material can be improved by using carbon fiber modification, which can be applied to the robotic arm, joint connecting rod, gear bearing and other parts of the robot, and has high application potential in the field of humanoid robots.
It is said that Tesla's Optimus-Gen2 humanoid robot is 10 kilograms lighter because of the use of PEEK material. If it is successfully mass-produced, it will continue to increase the demand for PEEK.
According to brokerage estimates, the demand for carbon fiber/PEEK in 2022 will be 135,000/7,560 tons. In the future, if humanoid robots can replace 10% of migrant workers, the corresponding demand for carbon fiber/PEEK will be 16.5/135,000 tons, and if robots can replace 80% of the construction industry in mainland China, the corresponding demand for carbon fiber/PEEK will be 22/180,000 tons.
At present, the humanoid robot industry is still in its infancy, and it still takes time for development to develop.
4. Domestic substitution of PEEK
Continental is now the world's largest importer of engineering plastics. According to statistics, the self-sufficiency rate of domestic engineering plastics is only 62%. The self-sufficiency rate for specialty engineering plastics is even lower, at 38% (2018 data).
From 2012 to 2020, the average annual compound growth rate of PEEK products in China reached 42.84%. However, the self-sufficiency rate of PEEK materials in China was only 25% in 2020.
The PEEK market consumption in China was around 2,334 tons in 2022 and the demand is expected to reach 4,358 tons in 2027. The industry space is still very considerable, and domestic enterprises can do domestic substitution on the one hand, and enjoy the rapid growth of the industry on the other hand, depending on whether they can transform opportunities into performance in the future.
5. Industry competition pattern: one super and many strong
In 2022, the total global PEEK production capacity will be about 16,000 tons/year, and the industry presents a competitive pattern of "one super and many strong".
Among them, Victrex is the world's largest PEEK producer, with a production capacity of 8,650 tons per year, accounting for more than 50% of the world's total production capacity. Solvay, Belgium has a PEEK production capacity of 2,500 tons/year. Evonik ranks third in Germany, with a production capacity of 1,800 tons per year, and its main production base is in China, but its products are basically exported to Europe and the United States.
There are a total of 8 PEEK producers in China, with a total capacity of 6,050 tons per year and an output of 2,380 tons, respectively. The representative enterprises are Zhongyan Co., Ltd. and Zhejiang PFLUON. Among them, the technological level of Zhongyan Co., Ltd. is in a leading position in China. In the next 5 years, the global PEEK greenfield projects will be mainly concentrated in China. The PEEK project to be put into operation in China in 2023 is the 2,000 tons/year PAEK project of Walt Co., Ltd.
6. Introduction to the fundamentals of concept stocks
There are not many PEEK concept stocks in A-shares, about a dozen or twenty, and the core companies are: PEEK manufacturers such as Zhongyan Co., Ltd., Walt Co., Ltd., Kaisheng New Materials, Zhaomin Technology, etc., as well as upstream raw material fluoroketone suppliers Xinhan New Materials, Zhongxin Fluorine Materials, and Ocean Biotechnology, and the downstream application companies are mainly Kangtuo Medical and China Resources Pharmaceutical.
Let's take a look at the fundamentals of key companies in the industry from the perspective of company risk, operation and valuation.
(1) Zhongyan shares
The historical performance seems to be a steady growth, but the company is a new sub-IPO last year, with a profit of 55 million in 2023, a year-on-year increase of -2.4%, and a decrease of 24.7%.
From the perspective of risk, the total cash flow from operating activities for three years is 14%, and the data is poor, and the company has no goodwill, no pledge by major shareholders, and no major executives and major shareholders to reduce their holdings. Except for cash flow, the risk indicators were generally good.
At the operational level, the three-year average growth rate of operating income was 25%, and the three-year average growth rate of non-net profit was 38%. The historical growth is not bad, but the performance in 2023 is slowing down.
Finally, looking at the valuation, the current market value is 3.2 billion, and the profit of 55 million corresponds to a price-earnings ratio of 58 times.
Brief summary:
In fact, the company's main products are pure resin series, accounting for 7 percent, and PEEK products account for only 0.6% in the 2023 interim report.
The company's focus lies in its position in the industry, the largest PEEK (polyetheretherketone) manufacturer in China and the top four in the world, with a production capacity of 1,000 tons per year and a global market share of about 8.07% in 2021.
According to the company's "prospectus", the annual output of 5,000 tons of polyetheretherketone (PEEK) deep processing series products comprehensive plant (phase II) project construction plan period of 2 years, after the completion of the construction will be in the third year of the operation period. Therefore, if you want to estimate the supply and demand performance of PEEK, you have to wait.
(2) Walter shares
Historical performance has fluctuated significantly, and the performance has declined sharply in the past two years.
From the perspective of risk, the total cash flow from operating activities for three years is 12%, which is poor, and the company's goodwill is 3%, which can be ignored. There is no pledge by major shareholders, and no major shareholders of senior executives reduce their holdings.
At the operational level, the three-year average growth rate of operating income was 16%, and the three-year average growth rate of non-net profit was -43%. Profits will decline sharply in 2022-2023, and there is no need to look at the valuation.
Brief summary:
The company's foundation should be there, and special polymer materials account for more than 50%. The highlight is that the PEEK production line is about to be put into production.
On March 20, Walter said on the interactive platform that the company's PEEK production line has completed the construction and is currently actively communicating with relevant departments to promote the acceptance work. According to the plan, the trial production plan will be evaluated, and it is expected to be put into production in the second quarter of this year.
The current market value is 3.8 billion, assuming that the profit will reach about 200 million in the next two years (institutional forecast), the price-earnings ratio will drop to below 20 times.
(3) Zhongxin fluorine materials
2020 to 2022 was ok. Due to the weak demand in the downstream market, the production, sales and prices of traditional products such as the company's basic fluorine chemical products, pharmaceutical intermediates and pesticide intermediates will decline in 2023, and the profit will turn into a loss in 23.
From the perspective of risk, the total cash flow from operating activities for three years is 26%, and the company's goodwill is 21.3%, which is acceptable. Major shareholders pledged 33%, and senior executives reduced their holdings by 2.44%. There are a lot of small problems.
At the operational level, the three-year average growth rate of operating income is 11%, and the three-year average growth rate of non-net profit is 35%. Data from two years ago has pulled up the average.
Loss-making stocks, the valuation situation does not need to be seen.
Brief summary:
In fact, the company is a fluorine chemical company, with related businesses accounting for more than 50%, as well as 20% pesticides and 20% pharmaceutical chemicals. Recently, we are preparing for a fixed increase, and it is planned to raise no more than 636 million yuan for the construction project of new electrolyte materials, the construction project of 2,000 tons of BPEF, 500 tons of BPF and 1,000 tons of 9-fluorenone products and supplementary working capital.
Rather than looking at PEEK, it is better to look at the recovery of fluorine chemicals, assuming that the profit of 1 to 200 million will be restored in the next two years, and the current market value of 3.6 billion corresponds to a price-earnings ratio of 36 to 18 times. In the final analysis, it still depends on the recovery of profits, and then track the changes in performance quarter by quarter.
(4) Xinhan New Materials
This looks slightly better, with steady growth before 2019, two years of adjustment, and a new high in 22 years. The biggest problem is that the company was listed in 21 years, and the previous performance has no reference.
From the perspective of risk, the total cash flow from operating activities for three years is 76%, and the data is excellent, and the company has no goodwill and no pledge by major shareholders, but the major shareholders of senior executives have reduced their holdings by 3.82%, which is a bit much.
From the perspective of operation, the three-year average growth rate of operating income is 16%, and the three-year average growth rate of non-net profit is 11%, and the company's growth is very average.
Finally, looking at the valuation, the rolling P/E ratio is 35.5 times, the P/B ratio is 2.98 times, and the current P/E ratio is in the historical average: mid-to-high zone.
Brief summary:
The company is an early manufacturer of aromatic ketone products engaged in the R&D and production of DFBP, the core raw material of PEEK, and its customers include Solvay, Vickers, Evonik, Zhongyan Co., Ltd., Jida Special Plastics and PFLUON and other major global manufacturers in the PEEK field.
In 2023, the core raw materials of special engineering plastics will account for 59%, although the profit will decline, the sales volume of PEEK raw materials will increase by more than 40%, and the R&D expenses will increase by 15.67% compared with the previous year.
Now the market value is less than 3 billion, the current new and old production capacity is about 4,000 tons, if the next two years can make a profit of 1~200 million, it looks good.
2. Summary:
Finally, to briefly summarize, the revenue and profitability of PEEK concept stocks are mostly weak, and the current market value is not large, and the future profit release expectations are all seen. However, PEEK materials are now very hyped, and the current total production capacity is also small, and the price is high when used in general equipment and more conventional equipment for automobiles, and it has not developed as fast as imagined. Moreover, it will take a long time for the ramp-up of newly put into production capacity and customer verification, so it is necessary to pay attention to tracking the performance of each quarter, and pay attention to the risk when the stock price is speculated.