Report Industry Investment Rating - Not mentioned in the provided content Core Viewpoints - The Hedda Convertible Bond (127088.SZ) is a high - quality balanced bond with the issuer's performance and valuation at a low level. The company has excellent fundamentals, and its performance and valuation are at historical lows. The bond has a long remaining term [1][4] - Based on the Shanxi Securities convertible bond valuation model, if the stock price remains unchanged, without considering forced redemption and downward revision, the reasonable valuation of the Hedda Convertible Bond is between 124 and 132 yuan [5] Summary by Relevant Catalogs Information about the Convertible Bond - The Hedda Convertible Bond has a rating of AA - a bond balance of 600 million yuan, accounting for 99.97% of the total issuance. The remaining term is 3.82 years. The latest closing price is 122.79 yuan, the conversion premium rate is 50.15%, and the pure bond premium rate is 14.83% [1] Information about the Underlying Stock - The underlying stock is Shandong Hedda (002810.SZ), established in 1992. Its main products are cellulose ether and plant capsules, and its business covers more than 100 countries and regions. The latest total market value is 4.797 billion yuan, and the 2025E PE is 26.3x. The actual controller is an individual, and the largest shareholder and persons acting in concert hold a total of 39.87% of the shares. The attributable net profit in H125 decreased by 8.71% year - on - year [2] Main Highlights of the Hedda Convertible Bond - The company has been deeply involved in the cellulose ether industry for nearly 30 years. Cellulose ether has many advantages. The company's products cover more than 70 categories and more than 100 models, with rich structure and leading technology. By the end of H125, its wholly - owned subsidiary Zhongfu Hedda had a production capacity of 10,000 MT and was one of the largest HEC manufacturers in China [3] - The company has extended its industrial chain to the downstream plant capsule industry. Compared with gelatin capsules, plant capsules have many advantages and are mainly used in the steadily growing health product industry. By the end of H125, the company's effective production capacity was 30 billion capsules, with a capacity utilization rate of about 60%. The US factory with a planned capacity of 20 billion capsules is under construction and is expected to be put into production in the middle of next year [4] - The company has a high proportion of overseas revenue. In 2024, the export proportions of building - grade, pharmaceutical and food - grade cellulose ether, and plant capsules were 56.4%, 57.3%, and 88.2% respectively. In 2025, the US imposed anti - dumping duties on some of the company's products, affecting orders and increasing raw material costs. Currently, the company is actively responding, and the unreasonable factors may ease in Q4, when the performance is expected to turn around [4]

Group 1: Financial Performance - In the first half of 2025, the company achieved revenue of 972 million yuan, a year-on-year increase of 4%, and a net profit attributable to shareholders of 113 million yuan, a year-on-year decrease of 9% [1] - In Q2 2025, the company reported revenue of 505 million yuan, a year-on-year increase of 1%, and a net profit attributable to shareholders of 68 million yuan, a year-on-year decrease of 3% [1] - The company plans to distribute a cash dividend of 1 yuan for every 10 shares [1] Group 2: Industry Position and Product Development - The company is a global leader in cellulose ether, which is widely used in construction materials, pharmaceuticals, food, aerospace, and new energy batteries [2] - The company established a subsidiary, Hershey, in 2014 to enter the plant capsule industry, achieving an integrated supply chain from cellulose ether to plant capsules [2] - By the end of 2024, the company's production capacity for cellulose ether and plant capsules is expected to reach 74,000 tons and 35 billion capsules, respectively, with an additional 15 billion capsules under construction [2] Group 3: Market Expansion and Strategic Initiatives - In the first half of 2025, the company's export revenue accounted for 65% of total revenue, with a year-on-year increase of 9% to 630 million yuan, and the gross margin for exports is significantly higher than for domestic sales [2] - In May 2025, the company signed an exclusive agency agreement with Univar Solutions to expand its pharmaceutical-grade cellulose ether distribution to Europe, accelerating its global layout [2] - The company is responding to the U.S. anti-dumping measures by planning to invest in a plant capsule project in the U.S. with a capacity of 20 billion capsules per year, with an investment not exceeding 500 million yuan [3] Group 4: Future Outlook - The company expects net profits attributable to shareholders for 2025-2027 to be 221 million, 339 million, and 427 million yuan, respectively, and has initiated coverage with a "recommend" rating [4]

Company Overview - The company specializes in cellulose ether, known as "industrial MSG," which has excellent properties such as thickening, water solubility, and film-forming, widely used in various industries including construction, pharmaceuticals, food, and more [3][4]. Industry Overview Cellulose Ether Applications - Cellulose ether is categorized into construction grade, pharmaceutical grade, and food grade, each with distinct applications and higher value in pharmaceutical and food grades compared to construction grade [5][6]. Construction Grade Cellulose Ether - The construction industry is the primary demand area for cellulose ether, utilized for improving the performance of building materials like premixed mortar and tile adhesives [6][7]. - The market for construction-grade cellulose ether is expected to grow due to ongoing urbanization in China, with the urbanization rate projected to reach 67% by the end of 2024, indicating significant demand for construction materials [7][10]. Pharmaceutical Grade Cellulose Ether - Pharmaceutical-grade cellulose ether is crucial for drug formulations, including controlled-release preparations, with a growing market driven by an aging population and increasing healthcare needs [16][17]. - The demand for pharmaceutical-grade cellulose ether is expected to rise as policies promote high-quality development in the pharmaceutical industry [18][19]. Food Grade Cellulose Ether - Food-grade cellulose ether is recognized as a safe food additive, used in various food products to enhance texture and moisture retention, with increasing awareness of health benefits likely to boost its market [22][23]. - The application of cellulose ether in plant-based meat products is expanding, with the global plant-based meat market projected to grow significantly, further driving demand for food-grade cellulose ether [24][25]. HEC Overview - Hydroxyethyl cellulose (HEC) is a significant non-ionic cellulose ether with diverse applications in coatings, daily chemicals, and pharmaceuticals, with a growing market due to environmental regulations favoring water-based products [26][29]. - The demand for HEC in the construction coatings sector is substantial, with the global coatings market expected to continue its growth trajectory [30][31]. Market Trends - The construction industry is transitioning towards green and smart building practices, which will enhance the demand for cellulose ether as a key additive in sustainable construction materials [11][12]. - The pharmaceutical sector is witnessing a shift towards high-quality excipients, with cellulose ether playing a vital role in innovative drug delivery systems [21][22]. - The food industry is increasingly adopting cellulose ether as a health-oriented additive, with potential growth in plant-based food products [24][25].