Core views

Huajin Co., Ltd. achieved operating income of 49.062 billion yuan, +26.95% year on year; achieved net profit of 529 million yuan, -43.89% year on year; affected by geopolitics, inflation and other factors in 2022, international oil prices fluctuated upward, putting pressure on the company's petrochemical sector and the downstream petrochemical sector; 2023Q1, the company's revenue was 9.975 billion yuan, down 6.73% from the previous year; Guimo's net profit - 498 million yuan, down 275.25% from the previous year; after deducting non-net profit - 504 million yuan, the same period last year A decrease of 279.44%.

occurrences

On April 13, the company released its 2022 annual report: in 2022, the company achieved operating income of 49.062 billion yuan, +26.95% year on year; achieved net profit of 529 million yuan, -43.89% year on year; achieved net profit of 483 million yuan after deducting non-return to the mother, -45.95% year on year.

In the 2022Q4 quarter, the company achieved operating income of 13.525 billion yuan, -1.13% year on year, +18.85% month on month; achieved net profit of 16 million yuan, -96.6% year on year, +34.51% month on month; net profit after deducting non-return to the mother was 0.02 billion yuan, -100.55% year on year, -158.47% month on month. 2023Q1, the company's revenue was 9.975 billion yuan, a year-on-year decrease of 6.73%; Guimu's net profit was 498 million yuan, a year-on-year decrease of 275.25%.

Brief review

Rising costs compounded by demand, and the company's 22-year performance was under pressure

Affected by international political turmoil in 2022, the US dollar exchange rate continued to rise, causing the company's imported crude oil costs to rise. At the same time, the downstream consumer market for the company's main chemicals continued to be sluggish. The increase in product prices was lower than the increase in raw materials, which put pressure on the company's profits in the second half of the year. The company's overall gross profit margin for the whole year was 16.53%, and the gross margins of the petrochemical sector, the fertilizer sector and the fine chemical sector were 16.21%, 39.32%, and 4.89% respectively, down from the same period last year.

By sector: in the petrochemical sector, operating costs were 35.399 billion yuan, a year-on-year increase of 38.37%, achieving operating income of 42.249 billion yuan, an increase of 32.12% over the previous year; in the fertilizer sector, the company seized market opportunities in 2022, and sales prices reached a record high. The price of urea reached a high of 3,400 yuan/ton, and sales fell 19.32% to 1,110,900 tons, achieving operating income of 2,668 million yuan, a decrease of 4.92% over the previous year; in the fine chemical sector, due to rising costs of upstream raw materials, operating costs rose 18.47% to 18.47% 3.637 billion, while achieving revenue of 3.824 billion yuan, an increase of 6.23% over the previous year.

In Q1 2023, affected by factors such as rising natural gas costs, the company's profitability was still under pressure. The overall gross profit margin was 11.45%, and the company's quarterly revenue was 9.975 billion yuan, down 6.73% from the previous year; net profit of the mother was 498 million yuan, down 275.25% from the previous year; after deducting non-net profit - 504 million yuan, a year-on-year decrease of 279.44%. In the future, with the gradual recovery of downstream demand for petrochemicals and coal chemicals, and the gradual stabilization of raw material costs, the company's profitability is expected to improve marginal.

Integrated petrochemical industry layout, diversified product line development

Currently, the company mainly lays out the three pillar industries of petrochemicals, chemical fertilizers, and asphalt/lubricants. It is an important domestic manufacturer of refined oil products, intermediate petrochemical products, and chemical products. The company actively promotes upstream and downstream collaborative development. On the petrochemical side, it builds an integrated refining and chemical industry chain with distinct characteristics such as refining, polyolefin, ABS, trimethylene, etc.; in terms of chemical fertilizers, the company seeks to develop downstream high-value-added products and extend the urea industry chain to promote transformation and development; in terms of asphalt/lubricants, it builds a comprehensive naphthalic resource deep processing industrial base for characteristic lubricants - high-grade road asphalt - new chemical materials to create a diversified product pattern.

Adhere to innovation-driven strategies to support the company's long-term development. The company attaches importance to scientific and technological innovation capabilities and continues to increase its investment in scientific and technological research and development. In 2022, the company's R&D expenses were 144 million, an increase of 15.88% over the previous year, and achieved remarkable results. New polymer products have been developed steadily. The company has piloted 21,000 tons of 10 new polymer products, of which the high-flow polystyrene HIPS425 is the first in China, and the high-impact, high-transparency polypropylene RC-20M is the second in the country; breakthroughs have been made in polymer modifications and additives, the white masterbatch has been successfully developed and delivered in batches, the light sky blue masterbatch has achieved batch trial production, and 5 compound additives required for the production of new polymer products have been developed and applied; new progress has been made in the petroleum and fine chemical R&D project, and the RIM resin project has completed testing and testing for beta nucleation. Small test Product research and development.

Profit forecast and valuation: The company's net profit for 2023, 2024, and 2025 is expected to be 540 million yuan, 650 million yuan and 8.3 billion yuan, and EPS is 0.34 yuan, 0.41 yuan and 0.52 yuan respectively. Corresponding to the current stock price PE is 20.7X, 17.1X and 13.4X respectively, giving a “buy” rating.

Risk warning:

(1) Crude oil prices continue to rise: crude oil prices are highly related to the international political and economic situation and fluctuate greatly. If crude oil prices rise further, the company's cost pressure will further increase, which in turn will affect the company's profitability; (2) Changes in the industry competition pattern: there are many domestic refining and chemical supporting projects, which may cause partial overcapacity in certain product sectors, thereby increasing industry competition and squeezing profit space in the industry;

(3) Global economic downturn: The downstream branches of refined chemical products are numerous and widely distributed, and are highly correlated with the macroeconomic situation. The economic downturn may affect industry product demand, and there is a risk that the company's performance will be damaged.

(4) Sensitivity analysis: