Events:
Premier Li Keqiang presided over an executive meeting of the State Council on June 13, which deployed and implemented a three-year action plan for the defense of blue skies to continuously improve air quality. The meeting proposed that from January 1 next year, the whole country will fully supply motor gasoline and diesel that meet the sixth national standards.
Main points of investment:
With the upgrading of country 5 and country 6, the demand for isooctane will increase significantly. On June 13, the executive meeting of the State Council deployed the implementation of the three-year action plan of the Blue Sky Defense War, which proposed a comprehensive supply of six gasoline and diesel fuel from January 1, 2019. The national six standard was upgraded to the national five standard, which further reduced the content of aromatics and olefins. Due to the high octane number of aromatics and olefins, the loss of gasoline octane number (gasoline antiknock index) caused by the decrease of the content of these substances needs to be made up by antiknock agents, mainly methyl tert-butyl ether (MTBE) and isooctane, but MTBE is a potential water pollutant. At present, MTBE blended gasoline has been banned in the United States, and Japan has set an upper limit on the proportion of MTBE, so the demand for isooctane will increase greatly. According to China's gasoline output of 130 million tons in 2017, every 1% increase in isooctane addition will increase the demand for isooctane by 1.3 million tons.
The company integrates "trade-logistics-warehousing-production-R & D-sales-finance". It is mainly engaged in energy investment and production, storage, transportation and trade of petrochemicals.
At present, it owns Ningbo Haiyue New Materials, Zhuji Yuedu Oil, Tianjin Northern Oil, Haiyue Asset Management and other companies. The company's business segment includes propane and C4 as raw materials for the production of propylene, isooctane, methyl ethyl ketone and other products; gasoline, diesel, LPG warehousing, wholesale and retail; equity investment and property leasing; terminal loading and unloading, warehousing and trading of all kinds of oil and liquid chemicals. Ningbo Haiyue (51% owned by the company) mainly produces and operates propylene, isooctane, methyl ethyl ketone and other products. The first phase of Ningbo Haiyue 1.38 million tons of propane and mixed C 4 utilization project was officially put into production in 2015, with an annual production capacity of 600000 tons of propane dehydrogenation to propylene (PDH) plant, 600000 tons of isooctane plant and 40,000 tons of methyl ethyl ketone plant, as well as supporting terminals, storage tanks, steam and environmental protection devices. Northern Petroleum is mainly engaged in terminal loading, unloading, warehousing and trading of all kinds of oil products and liquid chemicals. A 50, 000-ton specialized petrochemical terminal with an annual turnover of more than 10 million tons and a reservoir area of 850000 cubic meters of crude oil, oil products and chemical products have been built in Tianjin Port. Northern Petroleum has established a long-term strategic cooperative relationship with upstream and downstream enterprises. Zhuji Yuedu Oil has 52000 tons of finished oil depots, 2200 cubic meters of liquefied gas depots, supporting special railway lines and other ancillary facilities and 11 gas stations, oil and gas business in cooperation with Petrochina Company Limited and China Petroleum & Chemical Corp.
The company Northern Oil consolidated table and Ningbo Haiyue PDH profit rebounded, 2018Q1 company performance improved significantly. The company's 2018Q1 realized operating income of 5.486 billion yuan, an increase of 112.38% over the same period last year, and a net profit of 101 million yuan belonging to listed companies, an increase of 271.48% over the same period last year. The net profit attributable to shareholders of listed companies after deducting non-recurring profits and losses was 82 million yuan, an increase of 162.59% over the same period last year, and earnings per share was 0.22 yuan. The substantial increase in operating income of the company is mainly due to the acquisition of Northern Oil and consolidation, and the profit growth mainly comes from Ningbo Haiyue. Due to the high load of the plant after the completion of maintenance last year, PDH has a good profit. In addition, the company's financial expenses were 15.52 million yuan, down 43.12 million yuan from the same period last year, mainly due to the increase in exchange earnings due to the appreciation of the RMB in Ningbo Haiyue. We expect that under the current medium and high crude oil prices, the company's PDH plant high profits will continue, the gross profit margin of isooctane and oil products sales will pick up slightly, and the full-year results are expected to maintain high growth.
Profit forecast and investment rating: based on the judgment of sustained profits of PDH under medium and high oil prices and rising demand for isooctane caused by oil upgrading, the company expects operating income of 204.47 yuan in 2018 to 2020, net profit belonging to the parent company of 3.49 million yuan, 386 million yuan, and earnings per share of 0.750.83 pound 0.90 yuan, respectively, and the corresponding closing price PE is 14-12-11. Maintain the buy rating.
Risk hint: the risk of sharp decline in international crude oil prices and product prices, RMB exchange rate volatility risk, LPG trade risk.
