Tian Jia Yi Explosion Hit The Heart Of Printing And Dyeing Industry, A Shares Affected Geometry.

By the evening of March 24th, the death toll from the serious explosion accident of Tian Jiayi chemical company has risen to 64, 21 people are in critical condition, and 73 people have been seriously injured. Not only the capacity of the second largest inter benzene two amines in the country has been paralyzed, but also the industry faces the strongest safety and environmental inspection, and the expected vertical and horizontal price increases have been reflected in the A-share market last week, especially in the A share market.

Regulatory heavy blow will spread to Subei Chemical Industrial Park

Three feet of ice are not cold in a day. Tian Jiayi has been punished by the Environmental Protection Bureau for 6 times, and the Jiangsu chemical industry belt of Tian Jia Yi has been in the supervision outlet. The Yancheng chemical industry park in Xiangshui, which is located in the company, just passed the stopping date, and resumed production in early 2019; while the two chemical industrial parks in the north of the Xiangshui Chemical Industrial Park and the Guanyun were still completely shrouded in the shadow of the "129" explosion and the stealing and discharging of sewage events, and more than 200 enterprises were still under suspension due to the regulatory impact.

The impact of the explosion of Tian Jia Yi has far exceeded the "129" Lianyungang poly Xin biotechnology explosion in December 2017 and the pollution incident in Jiangsu chemical industrial park last March. Most mainstream organizations believe that it is almost inevitable for the relevant enterprises to stop production and investigate risks. A large number of safety acceptance work is difficult to complete in the short term. Guo Hai Securities believes that the Xiangshui park will take the similar road of two irrigation parks in the future and there is no hope of collective recovery. Every enterprise will face the most stringent separate inspection. In the short and medium term, the chemical capacity of the area will be cut off.

The longitudinal market impact of the explosion is obvious.

The distribution of dyestuff productivity in China is mainly concentrated in Jiangsu and Zhejiang, which is the "heart" of printing and dyeing industry. According to Zhuo Chuang statistics, because of the two accidents of the previous year and last year, the dye production capacity of Jiangsu has dropped suddenly. In May 2018, the disperse dye operation rate of the whole country dropped to 57%, the active dye operation rate dropped to 49%, and a few factories resumed production in late January 2019. The impact of Jiangsu's dye production and supply side is obvious. On the other hand, from the demand side, the growth rate of fixed assets investment in the national printing and dyeing industry was negative for the first time in 2017. And because of the increasingly stringent environmental protection, the printing and dyeing industry started to operate at 73.5% in 2018, down 7.3% compared with the same period last year, but the pressure is still smaller, but the pressure is obviously smaller than that of the supply side.

According to the latest survey results of the CIC consumer group, the printing and dyeing enterprises and dealers have only been preparing for 1 months or so, which has been in a low position compared with previous years. Tian Jiayi's sudden accident will trigger a new chain reaction. Although the overall industry chain of printing and dyeing industry is still facing challenges, the expected price increase of the upstream products of dyes has been formed and will be strengthened, and the performance of related companies is expected to be accelerated.

From a vertical angle, the biggest impact on the accident is the dye intermediate capacity. The two benzyl amine (mainly used as dye intermediates), which has been in great trouble, has a capacity of 17 thousand tons / year and ranks second in the whole country. Its capacity failure is undoubtedly easy to promote the price of dye intermediates. According to CITIC's statistics, the market price of benzene two amine has been maintained at 90 thousand yuan / ton, and the recovery is obvious.

Fig. 1: price trend of Resorcinol

Source: WIND, CITIC research and Development Division

Take the lead and move the whole body. In the heart of the dye industry, the oligopoly pattern is obvious. In addition to Zhejiang Longsheng, there are three oligopolies of the Jilin group and Kyrgyzstan group, which constitute the industry of disperse dyes and reactive dyes. The effective market share is more than 70%. With the continuous development of supply side reform, the price of disperse dyes and reactive dyes went out of the trough as early as 2018, and they rose by 40 thousand and 30 thousand yuan / ton respectively in the near future. The market for intermediates is changing, and the price of dyes is expected to rise.

Figure 2: price trend of disperse dyes

Figure 3: price trend of reactive dyes

Source: WIND, CITIC research and Development Division

Zhejiang Longsheng receives new capital attention

The first production company of dye intermediates in China is Zhejiang Longsheng. The company's current intermediate business accounts for 14.8% of the company's business, and the production capacity of inter benzene two amine is over 60 thousand tons / year, 30 thousand tons for self use and 30 thousand tons for export. Zhejiang Longsheng has not published its annual report. Some mainstream institutions expect that the 2018 net profit growth rate of the company is expected to lead by 64% in the same industry.

Due to the accident of Tian Jia Yi, the industry expects that the short-term price increase of benzene amine two will be about 10 thousand yuan per ton. According to Guo Hai securities, it is estimated that if the output of benzene two amine is calculated at 50 thousand tons in the last three quarters of Zhejiang Longsheng in 2019, the price of benzene two amine will increase by 10 thousand yuan / ton, the gross profit of the company will increase 500 million, the net profit will be increased by 300 million yuan, and the EPS per share will increase by 0.09 yuan this year, an increase of 8% over the 2018 EPS value of 1.25 yuan. The views of Huatai Securities and the convergence of the securities of the state sea - Zhejiang Longsheng EPS will increase by 0.08 yuan per share this year.

On the 22 day last Friday, the A shares of Zhejiang Longsheng daily trading, the same day billboard data showed that the main net inflow of 346 million yuan, net share of 17.1%, both were higher than the average data of nearly 5 days - 298 million yuan and 6.4%. Two institutions bought 38 million 990 thousand yuan, while Shenzhen stock exchange bought 62 million 930 thousand yuan and sold 27 million 380 thousand yuan at the same time. In addition, the amount of financing purchased on that day also increased from 8308 trillion yuan to 365 million yuan, and the degree of concern for funds increased rapidly.

The proportion of dyestuff intermediates business to the main business was second only to that of Zhejiang Longsheng, which was stimulated by the news of the seven color chemistry, Zhongqi stock and Shinta shares on Friday. In addition, the share price of intercontinental shares is limited. However, according to the report, Wang Haimin, director of Tian Jiayi chemical company, is also a legal person and executive director of Jiangsu expedition Chemical Co., Ltd. and Jiangsu is a wholly owned subsidiary of the expedition. The 70% of Anjo group has been following suit.

Figure 4: major dye intermediates business account and financial summary,

Figure 5: main accounts and financial highlights of major dyestuff companies

Lateral effects need to be observed.

Horizontally, if the impact of this accident really spread to the whole chemical industry park in Subei, the production of dyestuff enterprises will face "dystocia", and the scope of supervision will also spread to pesticides and acrylic acid intermediates in the region and even the whole country. Relevant listed companies include Jacques Technology (main phosphorus trichloride, three phosphorus oxychloride), Jiangsu Wuzhong (direct mixing dye and pesticide intermediates), etc. in addition, other listed companies in the whole country include Yang Nong chemical (domestic pyrethroid head, capacity 8100 tons), red sun (pyridine industry chain leader), Pao oi chemical (BF nitrile has 3000 tons of capacity, 7000 tons of new capacity will soon be put into production), and Haile (acetamiprid production capacity 1200 tons, 3500 tons of new nicotine insecticides new capacity is gradually being put into operation) and Changqing shares (with 3000% of isopropyl methoxamine production capacity) will be affected.