Transform carbon fiber, the future space can be expected

1. Viscose filament leading enterprise, transformation of carbon fiber, future space

1.1 Company Profile

Jilin Chemical Fiber Group was restructured from the original Jilin Chemical Fiber Factory, which was founded in 1960 and put into operation in 1964, and has now developed into the production and sales of chemical fiber. Jilin Chemical Fiber Company (000420) is the holding subsidiary of Jilin Chemical Fiber Group Co., LTD. The company was founded in 1960 and put into operation in August 1964. At present, the company mainly produces and sells chemical fibers, including viscose filament, viscose staple fiber and carbon fiber. Jilin Chemical Fiber Group directly holds 12.94% of the company's equity, its wholly-owned subsidiary holds 2.58% of the company's equity, Jilin City State-owned Capital Development Holding Group directly holds 6.99% of the company's equity, so Jilin City SASAC controls 22.51% of the company's equity in total. At the same time, Jilin Chemical Fiber Group holds 60.1% of Jilin Guoxing carbon fiber.

Jilin City is one of the earliest regions engaged in carbon fiber technology research and development in China, is also the only national carbon fiber high-tech industrialization base identified by the Ministry of Science and Technology, approved by the Ministry of Industry and Information Technology as the national new industrial demonstration base of carbon fiber, has formed "acrylonitrile - acrylonitrile base - carbon filament - downstream products" the most complete carbon fiber industrial chain in China. Carbon fiber filament production capacity, carbon filament production capacity ranked first in the country. Jilin City has 25 carbon fiber production enterprises such as Jilin Chemical Fiber and Jilin Carbon Valley, including 12 enterprises on the plan, and has achieved large-scale production of 4 series of carbon fiber downstream products and more than 10 kinds of end products. During the "14th Five-Year Plan" period, Jilin City gathered force to create "China's carbon Valley", and the production capacity of carbon fiber and carbon silk in large bundles was the first in the world. By 2025, Jilin City's raw silk production capacity is expected to reach 310,000 tons, carbon silk production capacity to reach 100,000 tons, carbon fiber composites and products production capacity to reach 50,000 tons, carbon fiber industry scale to reach 50 billion yuan.

At present, the company's main products include viscose filament, viscose staple fiber and carbon fiber.

1. Viscose filament: Viscose filament, also known as "rayon", is a substitute for natural silk. In recent years, the company has seized the opportunity to expand production capacity and seize the market vacated by enterprises in the industry, making the market share gradually increase. At present, the company's viscose filament production capacity is about 80,000 tons/year, and the global viscose filament total production capacity is about 280,000 tons. China's production capacity accounts for more than 75%. In recent years, viscose filament production capacity and demand are relatively stable, so the price change is relatively stable, but with the upgrading of consumption and industry concentration continues to increase, in the long run, the market prospects are still good.

2. Viscose staple fiber: viscose staple fiber is commonly known as "artificial cotton, rayon or viscose." The company's initial design capacity of viscose staple fiber is 100,000 tons/year, after process optimization and process reengineering, the actual production capacity can reach 120,000 tons/year, although it is not the best in the country, but effectively supplement the company's viscose fiber products, and viscose filament is beneficial to expand the overall sales, has accounted for nearly one-third of the company's total sales.

3. Carbon fiber: Known as the "black gold" in the field of materials, in the industrial field, wind power generation, light weighting of new energy vehicles, aerospace, pressure vessels, hydrogen energy utilization and other key areas, the company currently holds 49% of Jilin Baoxing annual output of large tow carbon fiber 8000 tons, the company's wholly-owned subsidiary Jilin Kemek annual output of small tow carbon fiber 600 tons, At the same time, the company raised funds through the non-public offering to build an annual output of 12,000 tons of carbon fiber composite pultruded plate project, the company is expected to reach the completion of the project, will form an operating income of 1,540 million yuan/year. Guoxing carbon fiber: Jilin Guoxing carbon fiber mainly focuses on the large tow carbon fiber link. On May 8, 2020, it was officially assigned to Jilin Chemical Fiber Group, and the actual controller became Jilin City SASAC. Before Guoxing carbon fiber production line was small, the group upgraded the original carbon fiber production line of 500 tons/year to about 1000 tons/year, and continued to expand production significantly. If the production line planning of 15,000 tons of carbon fiber project is proposed, as of June 2022, Jilin Guoxing carbon fiber production capacity has reached 18,000 tons/year. At the same time, the chemical Fiber Group issued a commitment: within three years from March 18, 2022, the chemical Fiber Group will take measures in line with state-owned assets supervision and securities supervision, including injecting the controlling stake of Guoxing Carbon Fiber into the listed company, to further protect the interests of listed companies and minority shareholders.

As the company is located in Jilin Economic and Technological Development Zone is a national carbon fiber high-tech industrialization base, the area has formed an industrial aggregation and supporting in the upstream and downstream areas of the carbon fiber industry, and with the continuous decline in the manufacturing cost of carbon fiber and its composite materials, the downstream application space will expand, the company's integrated layout is expected to benefit from the long-term expansion of the industry in the future.

1.2 Financial overview of the company

At present, the company's main business is viscose fiber, including viscose filament and viscose staple fiber; The small tow carbon fiber project of Kemaker, a wholly-owned subsidiary, has been fully completed. In the first half of 2022, the global economic growth continued to slow down, the domestic epidemic situation showed a multi-point distribution, affected by the outbreak of new coronavirus in Jilin City, the company took measures to reduce production, at the same time in the first half of the year, the prices of raw materials, chemical accessories and energy rose significantly, and the superimposed cost rose in the case of insufficient production, and the combined factors eventually led to a year-on-year decline in profits. In the past three years, under the influence of the novel coronavirus pneumonia epidemic sweeping the world, the risks and tests of the operation of the chemical fiber industry have increased. In the face of difficulties such as the macroeconomic downturn, the contraction of demand, and the reduction of orders, the economic efficiency and operation quality of the industry have dropped significantly year-on-year, and the market price of chemical fiber is generally running at a low level. At the same time, the industry entered the decline channel during the period, the market was in a stalemate, and the situation was not as expected. Especially after the price rise of bulk raw materials and the "double control", the price of chemical accessories, energy and so on has soared, greatly increasing the production and operating costs, resulting in the rapid compression of the profit space of the viscose fiber industry; As a result, the company's performance recorded a loss during the period.

In the first three quarters of 2022, the company achieved operating income of 3.032 billion yuan, +15.76% year-on-year; Net profit returned to the mother was -89 million yuan, year-on-year -6,745.07%. The company released its 2022 annual performance forecast on January 31, and it is expected that the company's revenue in 2022 will be 3.85 billion to 4.05 billion yuan, and the revenue in 2021 will be 3.58 billion yuan, which is +7.54%-13.13% year-on-year. Net profit loss of 78 million to 95 million yuan, +26.48%-39.64% year-on-year; Non-net profit loss of 13.65 to 30.65 million yuan, narrowing 77.56% to 90.01%. In 2022, faced with the pressure of rising costs such as raw and auxiliary materials and energy prices, the company responded by actively adjusting to further improve its operating performance; However, affected by the loss caused by the production reduction after the outbreak of the new coronavirus in Jilin City in the first half of the year, the net profit is still expected to be negative this year.

In the first three quarters of 2022, the gross profit margin of the company's overall sales was 7.86%, and the net profit margin of sales was -2.76%. From the point of view of products, the gross profit margin of viscose filament in the first half of the year was 10.01%, which showed a declining trend in the past three years. The main reason is that the downstream application of viscose filament in addition to China, Europe and South Asia are the main consumption areas, but the demand and price have declined in the past three years due to the impact of the global epidemic. And previously, India made countervailing investigations on more than 60 denser viscose filament yarns originating in or imported from China, a combination of factors led to a decline in gross profit margin, but at present, with the relaxation of the overseas epidemic, and India made a negative countervailing final ruling (meaning the end of anti-dumping restrictions), the current downstream demand of the industry has recovered, and viscose filament prices have begun to grow. And in the long run, there is also good for the export of viscose filament. Product viscose staple fiber 22H1 gross profit margin of 0.15%, China's viscose staple fiber industry in recent years boom degree continues to decline, under the influence of multiple negative factors the entire textile industry chain cycle blocked, some enterprises began to stop production to see the subsequent market supply and demand grid changes. The viscose staple fiber market is supported by the cost, and the price is basically unchanged from the same period last year, but the industry as a whole is in a state of loss due to the high price of raw and auxiliary materials such as pulp and liquid alkali.

Carbon fiber product 22H1 gross profit margin of 19.27%, carbon fiber current development momentum is good, broad prospects, especially civil large tow carbon fiber track high prosperity, wind, light based power new energy rapid growth has driven the demand for civil large tow carbon fiber, the market size is huge. The production line with an annual output of 600 tons of small tow carbon fiber prepared by Jilin Kemike, a wholly-owned subsidiary of the company, has been completed and reached production as of the end of the reporting period. The company shares 49% of Jilin Baojing mainly from large tow, low-cost carbon fiber research and development, production and sales, has been maintained full production and sales; At the same time, the company used the funds raised by the non-public offering to build the annual output of 12,000 tons of carbon fiber composite pultrusion plate project, and further advanced to the carbon fiber production chain.

In terms of expense rates, the company's expense rates have shown a downward trend in recent years. Previously, the company required to optimize the allocation of resources, vigorously control costs and reduce costs, and strive to transform and tap the potential of internal efficiency. In the first three quarters of 2022, the Company's expense rates were as follows: period expense rate (7.92%), financial expense rate (4.83%), management expense rate (2.14%), sales expense rate (0.78%) and research and development expense rate (0.18%).

2022H1 The net cash flow generated by the company's operating activities was RMB 0.096 million, which was mainly due to the increase in the price of raw materials and energy, resulting in an increase in the purchase of goods and a decrease in the net cash inflow. In terms of asset-liability ratio, in Q3 2022, the company's asset-liability ratio was 56.14%, and at the end of 2021, the company's asset-liability ratio was 66.28%, which decreased significantly, mainly due to the impact of the company's non-public offering of funds.

2. Carbon fiber business is ready for development and optimistic about the future development prospects

2.1 Carbon fiber materials have a wide range of application scenarios

Carbon fiber has obvious advantages in all aspects and has a strong weight reduction and reinforcement effect: carbon fiber is a high-strength and high-modulus fiber with a carbon content of more than 90%, with a diameter of about 5 to 10 microns, mainly composed of carbon protones. Carbon fiber is popular in wind power blades, aerospace, civil engineering, military and motorsports, and other competitive sports applications. As a raw material in the manufacturing process of various industries, carbon fiber has the following characteristics: 1) high strength: tensile strength above 3,500MPa; 2) High modulus: elastic modulus above 230GPa; 3) Small density: the density is 1/4 of steel, is 1/2 of aluminum alloy; 4) High specific strength: 16 times larger than steel, 12 times larger than aluminum alloy; 5) Ultra-high temperature resistance: under the condition of non-oxidizing atmosphere, it can be used at 2,000 ° C and melted and softened at 3,000 ° C; 6) Low temperature resistance: at a low temperature of -180℃, steel becomes more brittle than glass, while carbon fiber is still elastic; 7) Acid resistance, oil resistance, corrosion resistance: resistance to concentrated hydrochloric acid, phosphoric acid and other media erosion, its corrosion resistance exceeds gold and platinum, while having good oil resistance, corrosion resistance and small thermal expansion coefficient; 8) Large thermal conductivity: it can withstand acute cooling and acute heat, even if the high temperature of 3,000 ° C suddenly drops to room temperature, it will not burst.

Downstream applications of carbon fiber composite materials mainly include aerospace, sports facilities, industry and wind power equipment industry and other fields, driven by the development of green energy and new materials, China's downstream application of carbon fiber composite materials gradually expanded, began to layout in automobile manufacturing, construction transportation and other aspects, and further increased the industrial application in the field of wind power equipment.

The carbon fiber industry has been highly valued by the government, and the state has issued a series of industrial support policies on carbon fiber and carbon fiber composite materials in the past 10 years, which continue to guide and further improve the key production and application technologies of key varieties of carbon fiber materials. Among them, the "Made in China 2025" issued by The State Council in May 2015 set future development index requirements for the national carbon fiber and composite material technology development; In August 2016, the "Outline of the 13th Five-Year Development Plan of the Chinese Academy of Sciences" proposed by the Chinese Academy of Sciences included the core key technologies of carbon fiber and its composite materials in the science and technology Innovation 2030 major project; In October 2019, the National Development and Reform Commission issued the "Industrial Structure Adjustment Guidance Catalogue (2019 edition)", which listed the development, application and production of high-performance fibers and products such as carbon fiber as encouraged projects in the national industrial structure adjustment guidance catalogue to promote the development of carbon fiber industry. In March 2021, the 14th Five-Year Plan for National Economic and Social Development of the People's Republic of China and the Outline of 2035 Vision Goals proposed to strengthen the research and development and application of high-performance fibers such as carbon fiber and their composites to provide a good policy environment for the technological progress of the future carbon fiber industry.

The strong support of the state and the continuous updating of technology provide a good environment for the scientific research of the carbon fiber industry, and highly affirm the production and sales of relevant companies and the development of various application scenarios. At present, after long-term technology accumulation, China's carbon fiber leading enterprises are gradually breaking foreign technology monopoly, production capacity continues to expand, domestic carbon fiber models have successfully covered T300 to T1100, M35 to M65, to achieve the main carbon fiber model of Japan Toray benchmarking. Some models of tensile strength, tensile modulus, elongation and other performance indicators are even better.

2.2 Wind power blades are the largest domestic carbon fiber demand market, and the penetration rate is expected to continue to increase

As a kind of clean energy, wind power is favored by countries around the world before photovoltaic power generation, and has experienced rapid growth in globalization in the past ten years. Wind power generation refers to the direct conversion of wind energy into electrical energy by wind turbines. Among the various forms of wind energy utilization, wind power generation is the main form of wind energy utilization, and is also one of the most mature technologies in renewable energy, the most large-scale development conditions and commercial development prospects of power generation.

2.2.1 Carbon beam technology helps open the door to the application of carbon fiber in the field of wind power

With the goal of improving the cost effectiveness of wind energy and extending the service life of generators, the application of carbon fiber in wind power has many advantages, (1) light weight, carbon fiber materials help reduce blade weight and increase length without affecting stiffness and strength. (2) Optimize blade performance, using carbon fiber blade reinforcement can design longer, lighter, more efficient blades. In simple terms, the benefits of wind-electric carbon beams are that they strike an excellent balance between stiffness and cost, resulting in a slimmer blade profile that improves aerodynamic efficiency, making wind turbine blades lighter, longer, harder and stronger, and thus more efficient overall. Thus, the average cost of energy is reduced and the annual energy production is higher. In the past, the process is mainly for vacuum bag pressing and vacuum introduction, which is low efficiency and high cost. According to such materials and processes, only the wind turbine blade of more than 40 meters (that is, the wind wheel diameter of 80 meters, the power of more than 1.8 megawatts) can be accepted by users with carbon fiber instead of glass fiber. Under VESTAS's new structural process, the application of carbon beam pultruded by carbon fiber sheet has broad prospects.

The high efficiency, low cost and high quality carbon fiber pultrusion beam sheet process greatly reduces the cost of carbon fiber use. VESTAS, a carbon fiber main beam manufactured with a new design and new process, has completed technical research, and the use of carbon fiber in the field of wind power has entered rapid growth.

2.2.2 Wind power blades are large-scale, and the trend of carbon fiber gradually replacing glass fiber is established

At present, in order to reduce the KWH cost of wind power and improve product profitability, global wind power giants have adopted the development goals of large wind power blades and lightweight. In order to reduce the cost, it is necessary to increase the generation time and improve the ability of the fan to capture wind energy, and one of the most important ways is to increase the sweep area of the blade and increase the diameter of the blade. According to statistics, wind power blade size has developed rapidly, from 2010 to 2019, the length of the blade has gradually increased from 100 meters to 125 meters, and the blade size is expected to further increase to 150 meters or even higher in the future. As the length of the blade increases gradually, higher requirements are put forward for the quality control of the blade. It is understood that the traditional blade manufacturing materials are mainly glass fiber composite materials, but the glass fiber blade weight is relatively large, has been unable to meet the development trend of wind power blade large-scale. The carbon fiber composite material has lower density and higher strength than the glass fiber composite material, which can ensure that the wind power blade can increase the length and greatly reduce the blade weight.

According to GE's analysis, the diameter of the wind wheel will be expanded from the current 100 meters to 160 meters by 2025, and the IEA analysis can come to a similar conclusion. It can be seen that in order to improve the efficiency of fans and meet a wider range of wind field conditions, the industry has now reached a consensus: the expansion of wind turbine diameter is the future development trend of wind power. The expansion of wind turbine diameter inevitably leads to the decrease of blade stiffness and easier deformation. How to improve blade stiffness under certain quality control is a problem that must be considered in wind power blade design. The application of carbon fiber (mainly large tow carbon fiber) as a new material with light weight, high strength and high modulus in the field of wind power blades will be further improved.

2.3 The future growth of wind power is broad, further driving the demand for carbon fiber

According to GWEC, 93.6GW of new wind power installations will be installed globally in 2021. The cumulative installed capacity of wind power in the world reached 837GW. As a type of power with cost advantages, toughness and maximum decarbonization potential, wind power can become an important cornerstone of green rehabilitation and carbon neutrality.

The offshore wind power market has obvious inherent advantages and huge market development potential: Currently, the global wind power development is still dominated by onshore wind power, but offshore wind power has the advantages of rich resources, high power generation efficiency, close to the load center, small land resource occupation, and low difficulty in large-scale model development, which is widely regarded as the future development direction of the power generation industry. With the gradual development and utilization of high-quality resources on land, human beings began to turn to a wider area and more abundant resources of the ocean, offshore wind power generation has become the focus of attention. The sea is flat, the wind speed is generally large, and the construction of wind farms at sea can reduce the land use fee. More importantly, the coastal areas are mostly densely populated areas with high electricity load, which is conducive to the nearby consumption of offshore power generation and low risk of wind abandonment. These are all important reasons for the rapid development of offshore wind power in the world and are generally optimistic. And because of the high wind speed at sea, the single capacity of offshore fans is generally much higher than that of onshore fans, and because of this, offshore fans have a stronger demand for lightweight carbon fiber materials.

At the same time in 2022, Vestas carbon beam patent protection expires, because the application of carbon fiber materials in wind power blades has many irreplaceable advantages, so we believe that other wind power blade manufacturers will launch the application of carbon beam wind power blade products, will contribute to the carbon fiber in the wind power field of very large incremental market.

2.4 Carbon/carbon composites replace graphite materials, and photovoltaic thermal fields drive carbon fiber demand

C/C composite is a carbon matrix composite reinforced by carbon fiber and its fabric or carbon felt. It has the advantages of low density, high strength, high thermal conductivity, low expansion coefficient, good thermal shock resistance and high dimensional stability, making it a few alternative materials for applications above 1650℃, and the highest theoretical temperature is as high as 2600℃. Therefore, it is considered to be one of the most promising high temperature materials. At present, China's photovoltaic industry competition is fierce, the cost pressure is significant, C/C composite materials than traditional graphite materials have better insulation performance, higher strength, better toughness, and not easy to break, can effectively reduce production energy consumption, improve the service life of equipment, thereby reducing the cost of the entire production. C/C composite materials are very designable, and can be woven into any size and shape of the reinforcement according to the needs of the product structure, and its applications in the photovoltaic industry mainly include: Polycrystalline silicon hydrogenation furnace with internal and external insulation tube, U-type heater, insulation board, polycrystalline silicon ingot furnace with cover plate, crucible protection board, crucible bottom support, insulation board, cchralase silicon single crystal furnace (referred to as single crystal furnace) with crucible, flow tube, heating body, cover plate, bottom support, internal and external insulation tube, etc.

Czochra silicon single crystal furnace and polycrystalline silicon ingot furnace are the main equipment for the production of silicon materials in the photovoltaic industry, and their core components are high purity graphite materials. With the development of photovoltaic industry, it is difficult for traditional graphite materials to meet the needs of large-scale production equipment of CZ silicon single crystal furnace and polycrystalline ingot furnace, while C/C composite materials have good thermal physical properties, and compared with graphite thermal field materials, C/C composite materials are more than 3 times higher than graphite, so the product life is very long. It has a very large advantage over graphite materials in terms of cost performance. C/C composite insulation parts, structural parts and heating elements will be the development direction of thermal field materials for photovoltaic equipment such as Czochralski silicon single crystal furnace and polycrystalline ingot furnace. Stimulated by the "carbon peak, carbon neutral" policy, orders for monocrystalline silicon furnace skyrocketed, monocrystalline silicon furnace, mainly carbon felt functional materials and crucibles, thermal insulation barrels, trays and other carbon carbon composite structural materials: According to the data of the 2021 Global Carbon Fiber Composites Market report, it is conservatively estimated that the demand for carbon carbon composite carbon fiber will reach 24,300 tons by 2025, with a CAGR of 30% during the period.

2.5 Materials for hydrogen storage bottles, carbon fiber materials are expected to increase the demand space

High-pressure gas storage tanks are one of the largest and fastest growing markets for advanced composites, especially carbon fiber winding composites. Pressure vessels are mainly divided into the following five types: Type I: all metal structure, usually steel; Type II: Mainly metal structure, and in the ring coated with a certain glass fiber composite material, the metal is mainly steel or aluminum, and the metal container and the composite material share the structural load roughly equal. Type III: Metal lining with complete composite outer packaging, usually aluminum, with carbon fiber composite; The carbon fiber composite material bears the structural load. Type IV: Fully composite structural polymer (usually high-density polyethylene or HDPE) lining, carbon fiber or carbon/glass fiber composite; Composite materials bear all structural loads. V-type: no backing, all composite construction.

The composite hydrogen storage cylinder comprises lining material, transition layer, fiber winding layer, outer protective layer and buffer layer from the inside to the outside. The cycle of filling the hydrogen storage bottle may be long, and the hydrogen gas has strong permeability under high pressure, so the hydrogen storage tank lining material should have good barrier function to ensure that most of the gas can be stored in the container. At present, the type I-IV high-pressure storage cylinder structure has been commercialized, and among the four types of hydrogen storage cylinders, Type I bottle has the largest market share, more than 90%, Type II bottle has about 4% market share, followed by Type III and Type IV, and Type V (the new name) ranks fifth. However, based on material use, composites are the fastest growing material type, with a compound annual growth rate of 5.9 percent, according to Grand View Research. The use of carbon fiber composite materials allows the weight to be significantly lower than that of all metal pressure vessels. However, due to the application of high-cost carbon fiber composite materials in type IV pressure capacitors, the production cost of IV bottles is correspondingly increased. For the cost composition of 35MPa and 70MPa high-pressure hydrogen storage IV cylinders with hydrogen storage mass of 5.6kg, the main cost is carbon fiber composite material, and the cost of carbon fiber composite material accounts for 75.66% and 77.74% of the total system cost respectively. Compared with the total cost of a 35MPa pressure IV bottle of $2,900, the corresponding cost increases to $3,500 when the pressure increases to 70MPa, a 21% increase in cost. The main reason is that as the pressure increases, the proportion of carbon fiber composite materials is greatly increased.

According to the 2021 Global Carbon Fiber Composites market report, in 2021, the amount of carbon fiber used in gas cylinders in the country is about 3,000 tons. Among them, the amount of breathing cylinder is about 600 tons, CNG cylinder is about 500 tons, and the amount of hydrogen storage cylinder is about 1900 tons. In the next few years, the growth of breathing cylinders will be relatively stable, but the growth will be limited by the base. The use of natural gas cylinders will increase over the next three years, but will slow down starting in 2025. The main growth will be in hydrogen cylinders.

2.6 Capacity expansion + capital injection, the company is expected to take the industry to accelerate development

On December 15, 2022, Jilin Chemical Fiber Group 150,000 tons of raw silk project Phase II No. 5 and No. 6 two 10,000-ton raw silk lines were successfully driven. This is also the fourth production line that the group has started to drive since the winter, and the production of this production line effectively meets the production needs of the downstream green new energy, automotive lightweight, winding gas cylinders and other fields. Since 2022, Jilin Chemical Fiber Group Company has successively launched 60,000 tons of carbon fiber project, 150,000 tons of differentiated acrylic fiber project and other provincial and municipal key projects, 150,000 tons of raw silk project under construction, 12,000 tons, 15 million tons of carbon fiber projects and composite projects are advancing simultaneously. In the whole year, 6 raw silk production lines and 6 carbonization production lines were built and put into operation. Previously, the total investment of Jilin Chemical fiber 12,000 tons of carbon fiber composite project was 1.458 billion yuan, mainly through the formation of new production capacity of 12,000 tons of carbon fiber composite project, according to the company's plan to issue additional and non-public stock issuance committee meeting preparation of the letter of reply to the report shows that after the completion of the project, The operating income will be 1.539 billion yuan/year, and the total profit will be 142 million yuan/year.

Jilin Economic and Technological Development Zone, where the company is located, is a national high-tech industrialization base for carbon fiber, which has formed industrial clusters and supporting facilities in the upstream and downstream areas of the carbon fiber industry. The company has engaged in the chemical fiber industry for decades of production experience, reserves a certain number of technical personnel and industrial workers. In the early stage, the company has gradually extended to the field of carbon fiber composites, and the small tow carbon fiber production line currently under construction by Jilin Kemike Chemical Co., LTD., a wholly-owned subsidiary of the company, has provided experience for the company to enter the downstream field of the carbon fiber industry chain. At the same time, the company gradually holds 49% of the equity of Jilin Baojing Carbon Materials Co., LTD., becoming its main shareholder.

Jilin Kemek, a 100% subsidiary of Jilin Chemical Fiber, has a production capacity of 600 tons/year of small tow carbon fibers; The company holds 49% Jilin Baojing has 8000 tons/year 25-50K carbon fiber production capacity; In November 2021, the company announced the construction of 12,000 tons of carbon fiber composite project; In addition, Jilin Chemical Fiber Group 100% owned subsidiary Jilin Guoxing has a production capacity of 18,000 tons/year. Jilin Guoxing carbon fiber mainly focuses on the large tow carbon fiber link. On May 8, 2020, it was officially assigned to Jilin Chemical Fiber Group, and the actual controller became Jilin City SASAC. Before Guoxing carbon fiber production line was small, the group upgraded the original carbon fiber production line of 500 tons/year to about 1000 tons/year, and continued to expand production significantly. If the production line planning of 15,000 tons of carbon fiber project is proposed, the production capacity will be gradually released in August 2021, and the carbon fiber production capacity of Jilin Guoxing has reached 18,000 tons/year by June 2022. At the same time, the chemical Fiber Group issued a commitment: within three years from March 18, 2022, the chemical Fiber Group will take measures in line with state-owned assets supervision and securities supervision, including injecting the controlling stake of Guoxing Carbon Fiber into the listed company, to further protect the interests of listed companies and minority shareholders. Jilin Economic and Technological Development Zone, where the company is located, is a national high-tech industrialization base for carbon fiber, which has formed industrial aggregation and supporting in the upstream and downstream areas of the carbon fiber industry. At the same time, as the manufacturing cost of carbon fiber and its composite materials continues to decline, the downstream application space will expand. In the future, the company is expected to join hands with Jilin Carbon Valley to build a domestic carbon fiber "raw wire - carbon wire - composite" integrated industrial chain cluster.