Aggressive expanding separator and mild improving pipe; initiating with Buy
CZMZ is expanding separator capacity three-fold to catch up with strongdemand from EV battery supply chain at a CAGR of 30%. This accounts foc.25% of gross profit in 2017, rising to 41% by 2019E and underpins oupositive outlook on the company. Separately, it has a consistently strongplastic pipe business (c.40% of gross profit) which will benefit from coal-to-gasswitch projects and may increase volume at a CAGR of c.15% in the next threeyears. The BOPA business (c.35% of gross profit) will likely see profitabilitydecline but the strong separator and pipe operations should boost its bottomline at 21%/13% YoY in FY17/18E. We initiate coverage with a Buy.
Separators: expanding capacity three-fold to catch up with strong demand
We believe that the separator industry will continue to face a supply shortageover the next few years due to strong demand and a lack of quality producersable to provide large sca