Research Records| Huafeng Chemical (002064. SZ): Currently under construction is 50,000 tons of spandex and 255,000 tons of adipic acid production capacity

Zhitong Financial APP News, Huafon Chemical (002064. SZ) said in a june 10 survey that the current capacity under construction is 50,000 tons of spandex and 255,000 tons of adipic acid. The company's production and sales volume of adipic acid rank first in the world, with a very obvious scale advantage, not only can reduce the proportion of costs and fixed costs in various periods, but also form a large scale of raw material procurement, enhance the bargaining power of suppliers, and further enhance cost advantages. In 2020, the proportion of the company's adipic acid self-use was about 26%, and the rest was sold out (including related parties). At present, Huafon Group has a production capacity of 80,000 tons of nylon 66, adiponitrile production capacity of 50,000 tons, and nylon 66 is planned to be 300,000 tons in the future.

The specific Q&A transcript is as follows:

Q: What about the company's future development plan?

A: The chemical industry is facing a complex environment of wide fluctuations in oil prices, increasingly stringent environmental protection requirements, and slowing down the growth rate of traditional downstream. Under the background of R&D drive and demand transfer, China's chemical industry will usher in new development. Over the years, the company has been focusing on the polyurethane industry, not seeking excessive diversification of development, three major products: spandex, polyurethane stock solution, adipic acid are the industry leaders. In the future, we will always uphold the development strategy of "strengthening the main business, moderate diversification, innovation-driven, and combination of industry and finance", focus on the development of the polyurethane industry chain, and strive to build an international spandex industry leader, build a global polyurethane product material leader, build the world's largest high-quality adipic acid producer, drive high-quality development by troika, form an integrated industrial pattern of upstream and downstream industries, resist the industry cycle, enhance the company's profitability and anti-risk ability, and improve the company's comprehensive strength, core competitiveness and sustainable development capabilities.

Q: How is the company currently building new capacity? How do you see future price movements?

A: The company's current construction capacity is 50,000 tons of spandex and 255,000 tons of adipic acid. Spandex prices are mainly affected by supply and demand, prices are with the market, the company is more focused on the future, do a good job in the research and development and promotion of differentiated products, optimize the customer structure, while strengthening internal cost control, improve quality and efficiency, effectively resolve the fluctuations in raw material prices and other factors, to achieve stable and sustained growth in performance. From the perspective of downstream demand for adipic acid, with the technological breakthrough of adipicnitrile, the demand for nylon 66 will be further enhanced in the future, and with the expansion and release of downstream degradable plastic production capacity, the demand for adipic acid will be further enhanced.

Q: Competitiveness in the adipic acid industry?

A: The company's production and sales volume of adipic acid rank first in the world, and has a very obvious scale advantage, which can not only reduce the proportion of expenses and fixed costs in various periods, but also form a larger scale of raw material procurement, enhance the bargaining power of suppliers, reduce procurement costs, and further enhance cost advantages. With the technological breakthrough of adiponitrile, the demand for nylon 66 will be further enhanced in the future, and with the implementation of the plastic ban, the expansion and release of degradable plastics and other production capacity will further enhance the market demand for adipic acid.

Q: What are the constraints on future indicators brought about by carbon neutrality?

A: It has not been affected at this time. The company has been actively advocating and practicing the concept of energy conservation and emission reduction, actively improving production processes, reducing resource and energy consumption, promoting cleaner production, green office, green development, and actively fulfilling social responsibilities. The company will continue to pay attention to relevant policies and advance layout.

Q: Huafeng's adiponitrile and PBAT may compete with BASF and Hengli, how do you see the development of new industries in the future?

A: Adiponitrile and PBAT business are the business segments of Huafeng Group, the controlling shareholder of the company, and have not been merged into the listed company sector. From the perspective of the industry, with the technological breakthrough of adiponitrile, the demand for nylon 66 will be further enhanced in the future, and with the implementation of the plastic ban, the expansion of production capacity such as degradable plastics will further enhance the market demand for adipic acid.

Q: How are the Group's assets integrated into listed companies?

A: In accordance with the commitments made at the time of the reorganization of the company.

Q: The energy cost in the west is cheap, everyone goes to expand, where is huafeng's advantage?

A: The company's competitive advantage not only comes from low energy costs, but also from the formation of comprehensive factors, from research and development, cost, management and talent, as well as industrial chain integration and other advantages integration. For example, the advanced nature of the production process, the company's unit energy consumption is much lower than other peers, effectively balance material consumption, promote the reuse of by-products, improve the efficiency of raw material use, improve the process flow and improve the process control, so that product yield is improved, unit consumption is reduced, and it takes many years of continuous exploration and investment casting.

Q: Upstream, overseas layout planning? What is the ratio of adipic acid for self-use to export?

A: The company has done such research, but the external environment is complex and changeable, and the company will continue to pay attention to the relevant information. In 2020, our self-use ratio of adipic acid is about 26%, and the rest is sold (including related parties).

Q: The recent price trend of spandex is gratifying, how does the company view this matter?

A: The price trend of spandex in this round is affected by many factors, one is to benefit from the continuous rise in the prosperity of the chemical industry, the second is the sharp rise in spandex raw materials, the third is the increase in downstream applications, and the superposition effect of many other factors. We feel that this price trend will be suppressed with the subsequent release of production capacity of advantageous enterprises. However, in the long run, we have always looked at the future development prospects of the spandex industry: first of all, the change of consumption concept and the upgrading of consumer demand, so that the application scope of spandex continues to expand, and the apparent demand for spandex still maintains a stable growth rate; secondly, from the supply side, the concentration of the spandex industry is gradually increasing, and the industry competition is gradually moving towards oligopolism and differentiation.

Q: What is the group's adiponitrile-nylon 66 industrial chain?

A: At present, Huafeng Group has a production capacity of 80,000 tons of nylon 66, adiponitrile production capacity of 50,000 tons, and nylon 66 future planning is 300,000 tons.

[Disclaimer] The stock market is risky and you need to be cautious when entering the market. This information is derived from the investor activity record form issued by the enterprise, the text is slightly collated, does not constitute investment advice, the original record and more information Please refer to the relevant announcement of the enterprise.