Event: the company issued an annual report for 2022, with an operating income of 49.062 billion yuan, an increase of 26.95% over the same period last year, and a net profit of 529 million yuan, down 43.89% from the same period last year.

The company issued a forecast of first-quarter results, and the net profit attributed to shareholders of listed companies is expected to lose 400-500 million yuan, compared with a profit of 284 million yuan in the same period last year.

The profits of oil products at home and abroad remain high. In 2022, due to the conflict between Russia and Ukraine and the bottleneck of energy refining, the price difference of diesel cracking abroad remained at a high level. Since the beginning of this year, thanks to the growth of travel demand and the recovery of infrastructure, the domestic diesel cracking price gap has remained at a high level.

The company makes outstanding profits in diesel production, driving the growth of plate gross profit margin. Under the condition of weak demand and declining profitability in the downstream of the chemical industry in 2022, the gross profit of the company's petrochemical sector was 6.85 billion yuan, up from 6.326 billion yuan in 2021, a positive increase of 524 million yuan. Specifically, benefiting from the sharp rise in diesel cracking spreads in 2022 and exports in the fourth quarter, the company's crude oil processing and oil and products business gross profit margin was 22.03%, up 0.76% from the same period last year. The proportion of independent channel sales of the company's oil products reached 91%. 456000 tons of diesel fuel was sold. In 2022, the company won five batches of export quota of 440000 tons of refined oil, an increase of 140000 tons over the same period last year. As the price difference between overseas diesel and aviation oil cracking is at an all-time high in 2022, the increase in export volume has increased the profitability of the company's refined oil products and increased the operating rate of the company's refining facilities. The company's operating revenue in the northeast region accounted for 56.42%, a sharp increase of 54.92% over the same period last year.

The profit of the company's chemical fertilizer sector has been maintained, and the sales price of the product has reached an all-time high. In 2022, the highest price of urea in the company reached 3400 yuan / ton, and the prices of small and large granular urea were 53 yuan / ton and 49 yuan / ton higher than those of the standard enterprises, respectively.

Group refinery and chemical project construction: Saudi Aramco, Northern Industrial Group and Panjin Xincheng Industrial Group jointly funded the establishment of Huajin Ami Petrochemical Co., Ltd., with a shareholding ratio of 30%, 51% and 19%, respectively. Construction of the project will begin in the second quarter of 2023 and is expected to be fully operational in 2026, including an oil refinery with a processing capacity of 300000 barrels per day and a chemical plant with an annual production capacity of 1.65 million tons of ethylene and 2 million tons of p-xylene.

Profit forecast: the demand for oil products has gradually recovered, and the profit of urea remains high. We forecast that the operating income of the company from 2022 to 2024 will be 50 billion yuan, 51 billion yuan and 52 billion yuan respectively, the net profit of returning to the mother will be 539 million yuan, 603 million yuan and 642 million yuan respectively, and the EPS will be 0.34 pounds 0.38 pounds 0.40 yuan respectively. Considering growth and refining assets, we give the company an "overweight" rating of 25 times PE and a target price of 8 yuan a year according to our 2023 performance.

Risk tips: large fluctuations in international oil prices, macroeconomic risks and so on.