Jiutian Chemical Group - CGS-CIMB Research 2021-04-28: A Flying Start

JIUTIAN CHEMICAL GROUP LIMITED (SGX:C8R) | SGinvestors.io JIUTIAN CHEMICAL GROUP LIMITED (SGX:C8R)

Jiutian Chemical Group - A Flying Start

  • Jiutian Chemical's 1Q21 net profit was above expectations at RMB90m (+42% q-o-q, 31-fold increase y-o-y), driven by higher-than-expected ASPs.
  • DMF prices remained high at RMB11k/ton (+40% year-to-date, +120% y-o-y), thanks to robust downstream demand. We raise our Jiutian Chemical's FY21F net profit forecast by 41%.
  • We see possibility of a maiden dividend (since 2008) to be declared by Jiutian Chemical this year. Reiterate ADD with a higher target price of S$0.15, still pegged to 5.7x FY22F P/E.



1Q21 a record quarter for Jiutian Chemical

  • Jiutian Chemical Group (SGX:C8R)’s 1Q21 net profit of RMB90.3m (+42% q-o-q, 31-fold increase y-o-y, see Jiutian Chemical's announcements) was above our expectations (our forecast: RMB78.5m), forming 41% of our FY21F forecast.
  • Key surprise was higher-than-expected ASP for both dimethylformamide (DMF) and methylamine (MA), which grew 98% y-o-y and 38% y-o-y, respectively.
  • Despite 1Q being a seasonally weak quarter due to CNY, plant utilisation rate remained optimal. These factors resulted in 1Q21 revenue growth of 120% y-o-y and gross profit margin expansion of 25% points to 31.5%.


Continued strength in DMF prices

  • DMF prices remains high at RMB11k/ton currently (inclusive of 13% value-added tax), according to 100ppi.com. Backed by strong net profit forecast for Jiutian Chemical is raised by 41% to RMB312m accordingly.


Dividend payout a possibility for FY21F

  • According to Jiutian Chemical, its main operating subsidiary in PRC, Anyang Jiutian, has returned to a dividend payout ratio of 20%, this implies an FY21F dividend of S$0.007 per share and a dividend yield of 6.6%.


Reiterate ADD on Jiutian Chemical, with a higher target price of S$0.15






ONG Khang Chuen CFA CGS-CIMB Research | Kenneth TAN CGS-CIMB Research | https://www.cgs-cimb.com 2021-04-28
SGX Stock Analyst Report ADD MAINTAIN ADD 0.150 UP 0.135



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