Domestic refining and chemical production capacity is close to the upper limit, and refinery values have ushered in a revaluation
The primary processing capacity of domestic crude oil will be controlled at 1 billion tons in 2025, and China's oil products and refining by-products will face a supply ceiling. Production capacity was limited ahead of schedule in the context of growing demand for economic recovery. Refining products are expected to end the pattern of long-term excess, and production capacity will be phased out against the backdrop of increasingly strict crude oil quotas and tax inspections, continuing to benefit existing production capacity, and the value of high-quality refining and chemical assets is expected to be re-evaluated.
Demand recovery is expected to improve, and refining products continue to thrive
In 2023, with the change in the epidemic prevention policy, traffic volume such as highways and civil aviation was released at an accelerated pace, and demand for refined oil products recovered. Refining products such as refined oil products and asphalt are expected to maintain a high boom in supply-side production capacity expansion, a downward shift in the price center of crude oil prices on the cost side, underpinned infrastructure on the demand side, and there is still plenty of room for international flights to recover. At the same time, the company has benefited from an upward shift in urea price in the context of food security, increasing profit margins.
China and Saudi Arabia joined hands to officially launch the Panjin project
After the Huajin Aramco project is put into operation, Huajin Group will have a total annual refining capacity of 23 million tons. According to the State Assets Administration Commission's guidelines that world-class model enterprises should use listing platforms and make full use of capital market resource allocation functions. At the same time, Huajin Co., Ltd. stated that it will participate in fine chemical and raw material engineering projects jointly invested by Huajin Group and Saudi Aramco in due course. As the only petrochemical listing platform of the Ordnance Group, Huajin Co., Ltd. will fully benefit from the collaborative development of the parent company's large-scale refining and chemical projects.
Profit forecasting
It is predicted that the company's revenue for 2023-2025 will be 46.5, 46, and 67.6 billion yuan respectively, and the EPS will be 0.41, 0.61, and 0.74 yuan respectively. The current stock price corresponding to PE is 16.8, 11.3, and 9.4 times, respectively. This is covered for the first time, giving a “buy” investment rating.
Risk warning
Risk of a sharp drop in crude oil prices; risk of economic downturn; risk of large fluctuations in product prices; risk of project construction falling short of expectations.