Focus on the main petrochemical industry, the performance has been greatly improved. The company specializes in petrochemical, chemical fertilizer, asphalt / lubricating oil three major businesses. In 2021, the company has a production scale of 8 million tons / year of oil refining, 500,000 tons / year of ethylene, 1 million tons / year of road asphalt, 900,000 tons / year of lube base oil and 1.32 million tons / year of urea. In 2021, the company achieved an operating income of 38.552 billion yuan, an increase of 26.66% over the same period last year, and a net profit of 894 million yuan, an increase of 175.47% over the same period last year.
The supply of the refining and chemical industry is limited and the demand is expected to be released. On the supply side, under the background of carbon peak, the clearing of backward refining capacity is accelerated. Shandong Province, as the largest province of georefining in China, plans to phase out 26.96 million tons of backward refining and chemical production capacity from 2020 to 2022. 21 million tons have been phased out by 2021 and 5.96 million tons are expected to be phased out in 2022. On the demand side, the economic recovery after the epidemic is expected to boost the demand for oil products. In 2021, China's output and consumption of refined oil products were 3.57 and 341 million tons respectively, an increase of 7.85 percent and 3.20 percent respectively over the same period last year, which is basically the same as the level in 2019. With the recovery of the epidemic and economic recovery, the demand for oil products is expected to continue to grow.
The prices of crude oil and petrochemical products are high and the industry is booming. As of May 31, 2022, the main continuous futures settlement price of Brent crude was 112.8 US dollars per barrel, up 57.9 percent from the beginning of the year. The profitability of refined oil products has been enhanced. As of May 31, 2022, the price differences between kerosene, diesel and crude oil were 7081.5 yuan and 7988.5 yuan per ton, respectively, up 10.9 percent and 16.4 percent from the beginning of 2022, respectively. The increase in the price gap between kerosene, diesel and crude oil opens up profit space for relevant production enterprises.
The economic performance of the industry has picked up, and the integration of the industrial chain has a significant advantage. The domestic petrochemical industry boomed in 2021, with an overall operating profit margin of 8.03%, the highest since 2010. On the one hand, the company is an important domestic producer of refined oil, intermediate petrochemical products, synthetic resin and urea, forming an integrated industrial chain of refining, polyolefin, ABS, metatoluene and so on. At the same time, the company continues to extend the industrial chain to build a naphthenic resource comprehensive deep processing industrial base of characteristic lubricating oil-high-grade road asphalt-chemical new materials, so as to realize the coordinated development of upstream and downstream. On the other hand, Huajin Group will join hands with Saudi Aramco to build a large-scale oil refining integrated unit of 1500 million tons per year, which is expected to be put into operation in 2024. At that time, the company is expected to participate in the project, or give full play to industrial synergy with it.
Investment suggestion
The petrochemical industry is expected to rise, and the company's performance is expected to continue to grow. We estimate that the net return profit of 2022Accord 2023 in 2024 is 1.143 billion yuan and the corresponding EPS is 0.57 and 0.66 respectively. Based on the closing price of June 1, 2022, the PE is 9.14 times that of 11.41 Plus 9.88. Based on the prosperity of the industry and the future development of the company, the coverage is given a "highly recommended" rating for the first time.
Risk hint
Abnormal fluctuations in crude oil prices, upgrading of environmental protection policies, repeated domestic epidemics, etc.