Incident description
Yueyang Xingchang announced the 2022 semi-annual report: during the reporting period, the company achieved operating income of 1,561 million yuan, +131.35% year on year; Guimu's net profit was 30 million yuan, +152.97% year on year.
Incident reviews
The Q2 performance was in line with expectations. The company's Q2 revenue was 778 million yuan, +109.70% year on year, -0.74% month on month, and net profit of Q2 was 19 million yuan, +4.84% year on year and +57.51% month on month. Q2 gross profit margin is 8.82%, month-on-month +2.98pct, Q2 net profit margin is 2.99%, +1.14pct month-on-month. The operating rate of the company's main equipment increased year-on-year in the first half of 2022, and production and sales of major products increased year-on-year.
Affected by international oil prices, overall gross profit was damaged in the first half of the year, but raw material prices in Q2 fell month-on-month, and profitability in Q2 increased compared to Q1.
The whole process of localization of the high-end polyolefin project is leading, and production is expected to be put into operation next year to help the company take off. No large-scale production line for mPP has yet been put into operation in China. After the first phase of the company's high-end polyolefin production capacity of 300,000 tons is put into operation next year, it will be the first large-scale production line in China where the whole process is localized (including metal-rich catalysts). Currently, domestic demand is 100,000 tons, but there is huge room for future growth. The successful experience of the company's MPP industrialization is expected to be replicated into POE products. The rapid increase in the penetration rate of downstream POE film will bring about a sharp increase in demand for POE particles. Since domestic production has not been industrialized and overseas production is expanding slowly, future POE will show a tight pattern of supply and demand. The company is currently actively promoting the construction of a pilot line for the localization of the entire POE process. It is expected that the card market will become one of the leading domestic enterprises in the high-end polyolefin field in the future.
Lay out deep processing projects for cresol and petroleum coke to continue to deepen and strengthen the existing industrial chain. Xinling Chemical, a holding subsidiary of the company, will horizontally expand metocresol products with higher technical barriers and build 6,700 tons/year of parabens, 5,100 tons/year of cresol, 3,300 tons/year 2,6 ditert-butyl paracetyl paracetol, and 400 tons/year of solvent oil projects. It is expected that the project will be put into operation in Q4 2022, which will be one of the contributing points to the company's performance increase in 2023. At the same time, the company relied on Changling's refining and chemical raw materials resources to jointly invest in the establishment of Hunan Liheng with Shanghai Banchi and Shanghai Banyou. The total plan for a 400,000 ton post-calcined coke project is currently in the energy evaluation process and approval stage. The source of raw materials for low-sulfur coke has become a bottleneck in the expansion of production in the downstream anode industry. It is expected that production in the middle of next year will consolidate the foundation of the company's oil processing business.
Investment advice
We expect the company's revenue for 2022-2024 to be 3,064 million yuan, 4,509 million yuan, 5.973 billion yuan, and net profit of the mother to be 71 million yuan, 207 million yuan, and 347 million yuan. According to the latest closing prices, corresponding PE was 94 times, 32 times, and 19 times respectively, covering the “recommended” rating for the first time.
Risk warning
Oil prices fluctuated greatly, terminal demand fell short of expectations, and the company's project progress fell short of expectations.