Event: the company released its quarterly report for 2014. during the reporting period, the company achieved operating income of 3.053 billion yuan, an increase of 19.3% over the same period last year. The net profit belonging to shareholders of listed companies was 72.4884 million yuan, an increase of 47.19% over the same period last year.
Comments:
Net profit increased sharply compared with the same period last year. In the first three quarters of 2014, the company realized a net profit of 72.4884 million yuan belonging to shareholders of listed companies, an increase of 47.19% over the same period last year, mainly due to the gradual realization of income from the company's new project MTBE. The gross profit margin of sales also rebounded significantly, reaching 8.37%, an increase of 1.4 percentage points over the same period last year. In addition, the company's 80,000t / a MTBE raw material pretreatment project has also started trial production on September 26th, 2014, which solves the problem of shortage of isobutene raw materials needed for MTBE production, and is expected to further promote the company's performance.
MTBE will benefit from upgrading the quality of domestic oil products. The cost performance of MTBE is relatively high, and increasing the octane number by adding MTBE has become the most economical means to improve the gasoline standard in China. In 1990, the average MTBE addition of gasoline in China was only 0.40%, and most of the gasoline was still leaded gasoline; in 2000, the average MTBE addition of gasoline in China increased to 2.25%, and by 2013 it increased again to 6.56%. China's gasoline output in 2013 is close to 100 million tons, which means that every 1% increase in the proportion of MTBE will increase the demand for MTBE by nearly 1 million tons, so the demand for MTBE driven by the upgrading of oil quality will be considerable.
Polypropylene still has some room for profit. At the end of 2013, the domestic production capacity of polypropylene reached 13.22 million tons, and there is a large amount of new production capacity. The market is relatively worried that polypropylene will enter the stage of overcapacity in the next two years. We think that it is very difficult for the industry to enter the stage of overcapacity at least before 2016, and polypropylene still has some room for profit in the future.
The company has the expectation of business transformation. The company's current products are basically based on the platform of Maoming Petrochemical, the existing business can only provide the company with a basis for performance and cash flow. Judging from the example of polypropylene, it is impossible for China Petroleum & Chemical Corp to continue to rely on Maoming Petrochemical's platform for business expansion in the future. Therefore, if the company wants to develop, it must carry out business transformation. Through the company's recent announcement, including the replacement of the general manager and other senior executives, we can see the urgency and direction of the business transformation requirements of major shareholders. It is suggested that we should continue to pay attention to the direction of the company's business transformation in the future, and the company's financial situation is good. At present, the company's asset-liability ratio is only 25.27%, and there is a large room for financial leverage.
Earnings forecast and rating: it is estimated that the company's net profit belonging to the parent company from 2014 to 2016 is 0.84,0.89 and 98 million yuan respectively, and the corresponding diluted earnings per share are 0.16,0.17,0.19 yuan respectively. The dynamic PE corresponding to the closing price of 7.40yuan per share on October 22nd 2014 is 46 times, 43 times and 39 times respectively, maintaining the "overweight" rating.
Risk factors: macroeconomic downside risks; the supply of polypropylene raw materials can not be solved; the upgrading of oil products quality is not up to expectations.