Event

The company released its three-quarter report in 2016, with revenue of 714 million yuan in the first three quarters, an increase of 21.27% over the same period last year, a net profit of 20.87 million yuan belonging to shareholders of listed companies, and an EPS of 0.161 yuan. Among them, the EPS of Q3 is 0.09 yuan. The company expects a net profit range of 2400-27 million yuan for 2016 and an EPS range of 0.185-0.208 yuan, and is expected to reverse losses for the whole year.

Brief comment

First, the product price has hit bottom and rebounded, and the capacity expansion and transformation of the polypropylene plant has been completed to reverse losses.

The company is a listed company controlled by Petrochina Company Limited, mainly engaged in the development, production and sales of new petrochemical materials, fine chemicals and medical and health products. At present, there are 100000 tons of cracking C5 separation plant, 100000 tons of cracking C9 separation plant, 30,000 tons of modified engineering plastics plant, 30,000 tons of polypropylene and other major equipment, the main products are light aromatic hydrocarbons, ethylene tar and polypropylene.

Since the beginning of 2015, the company has been affected by many factors, such as the decline of the overall economic environment, the shrinking market demand, the downward price of products in the petrochemical industry, the reduction of raw material supply and the expansion and transformation of the company's production facilities, the performance has been declining all the way, with a loss of 16.63 million yuan for the whole year of 2015.

In 2016, as product prices gradually bottomed out, the company's performance began to recover; the ex-factory price of C9 produced by the company has risen from 2300 yuan / ton at the end of 2015 to 3000 yuan / ton in September 2016; the ex-factory price of ethylene tar produced by the company rose from 1150 yuan / ton at the beginning of 2016 to 1500 yuan / ton at the end of September.

The company achieved a net profit of 750000 yuan in the first quarter and successfully reversed losses. With the completion of the capacity expansion and transformation of the polypropylene plant in the first half of the year, the company reported a net profit of 9.68 million yuan. The net profit in the first three quarters was 20.87 million yuan, mainly due to the increase in gross profit of the products. Gross profit of light aromatic hydrocarbons increased from 9.86% in 2015 to 23.1% in the first three quarters of 2016, and gross profit of ethylene tar increased from 9.8% in 2015 to 13.83% in the first three quarters of 2016.

Second, pay attention to the only remaining capital operation platform of Petrochina Company Limited Group in A shares.

On March 29, 2016, Petrochina Company Limited Group held the eighth meeting of the leading Group for comprehensively deepening Reform. In principle, the meeting adopted Petrochina Company Limited Group's opinions on comprehensively deepening the implementation of reform and the main points of work in 2016. On June 28, 2016, Petrochina Company Limited Group held the 11th meeting of the leading Group for comprehensively deepening Reform, which in principle approved the framework plan for the reorganization and restructuring of engineering construction business, which means that Petrochina Company Limited will make significant progress in the reform of state-owned enterprises. its professional restructuring has taken an important step.

Petrochina Company Limited Group injected its financial business assets into * ST Jichai on September 6, 2016. after the completion of this transaction, * ST Jichai will hold equity in a number of financial business assets through PetroChina Capital and its subordinate wholly-owned companies. The company's business scope will cover financial companies, banks, financial leasing, trust, insurance, insurance brokerage, securities and other financial businesses, becoming a comprehensive financial business company. On September 10, 2016, * ST Tianli issued a major asset restructuring plan, in accordance with Petrochina Group's internal development strategy, using * ST Tianli as the listing platform, to inject major assets of Petrochina Group's engineering construction business into listed companies. After the completion of this transaction, * ST Tianli will become the listing platform of petroleum engineering construction business under Petrochina Group, mainly engaged in engineering design, engineering contracting and engineering construction in the fields of oil and gas, chemical industry, etc. The main business of listed companies will be changed to oil and gas field surface engineering services, storage and transportation engineering services, refining and chemical engineering services, environmental engineering services, project management services as the core of petroleum engineering design, construction and general contracting and other related engineering construction business.

The remaining assets and business of Petrochina Company Limited Group are mainly engineering and technical services (upstream exploration oil service business), petroleum equipment manufacturing, scientific research and institutions, other businesses, and other businesses of the Group. It mainly includes Kunlun Gas, China CNOOC, China Marine fuel Co., Ltd., and Transportation Company. Due to the lack of resources of the listed companies under Petrochina Company Limited Group, Daqing Huake is the only capital operation platform left by Petrochina Company Limited Group A shares. The expectation of asset restructuring is relatively strong, and the value of the platform is prominent.

Investment suggestion

We estimate that the net profits attributed to the parent company from 2016 to 2018 are 31.4 million yuan, 42 million yuan and 43.3 million yuan respectively, the realized EPS is 0.24,0.32 yuan and 0.33 yuan respectively, and the corresponding dynamic PE is 115,86 and 84 times respectively; considering that Daqing Huake is the only remaining capital operation platform of Petrochina Company Limited Group, it is rated as "overweight" for the first time.

Risk hint: capital operation platform is expected to fail