Event description

According to the company's semi-annual report for 2023, the operating income from January to June in 2023 was 378 million yuan, down 13.09 percent from the same period last year; the net profit from returning to the mother was 40.14 million yuan, down 39.85 percent from the same period last year; and the net cash flow from operating activities was 2.0861 million yuan, down 87.69 percent from the same period last year. Of this total, the operating income in the second quarter of 2023 was 185 million yuan, down 14.94 percent from the same period last year and 4.49 percent from the previous year; the net profit returned to the mother was 21.13 million yuan, down 28.52 percent from the same period last year and an increase of 11.13 percent from the previous year.

Event comment

Performance improved slightly in the first half of 2023 compared with the previous year. The company is one of the few professional suppliers of high-performance catalysts and chemical auxiliaries of polymer materials in China. At present, there are 24 kinds of catalyst products and 7 kinds of antioxidant single-agent products. The company's main cooperative customers include three barrels of oil, Wanhua chemical and other state-owned enterprises and private refining and chemical, Baofeng energy and other private enterprises. The company has a polyolefin catalyst capacity of 225t (to be expanded to 475t), a single antioxidant capacity of 22500 t (to be expanded to 44500 t), and a composite additive capacity of 8500 t (to be expanded to 28500 t). Revenue and profits of the company declined in the first half of 2023 compared with the same period last year, mainly due to the influence of the macroeconomic situation, the overall downward pressure on the chemical industry was greater, and the market demand declined. The sales prices of the company's single products of catalysts and antioxidants fell 0.08% and 12.73% compared with the same period last year, but the sales prices of composite auxiliaries rose 5.57% compared with the same period last year. At the same time, Petrochemical Technology, the main body of the company's high-end polyolefin POE project, has set up a core project team. as a result, there has been a surge in staff compensation, start-up expenses and other management expenses of petrochemical technology in the first half of the company, resulting in a year-on-year decline in net profit higher than that of operating income.

The new project starts and starts the second growth curve. The company officially launched the POE high-end new materials project, into the chemical high-end new materials. The company's POE high-end new material project will be divided into two phases: the short-term project and the long-term project. The overall planning covers a total area of 1.333 million square meters, and the total investment of the short-term project is expected to be 10 billion yuan, of which the total investment of the first phase of the short-term project is expected to be 6 billion yuan, and the investment in fixed assets is expected to be 4.5 billion yuan. It will be used for the construction of 200,000 tons / year POE, 300,000 tons / year ethane α-olefin (later section) and public works and other related supporting facilities. The total investment of the second phase of the recent project is expected to be 4 billion yuan, and the investment in fixed assets is expected to be 3.5 billion yuan, which will be used for the construction of 200,000 tons / year POE, 300,000 tons / year ethane to α-olefin (former section) and public works and other related supporting facilities. The long-term planning project initially plans to build 400,000 tons / year liquid phase polyethylene, 300,000 tons / year ethane to vinyl acetate, 200,000 tons / year POE, carbon dioxide reforming to olefins and public utilities and other related facilities.

The gap between supply and demand of POE expands, and the company's layout is earlier, which is expected to benefit. From the supply side, taking into account the expansion of overseas and domestic devices, it is expected that production capacity will be put into production from 2024, but taking into account the plant commissioning, capacity climbing and other problems, the actual supply release will begin after 2025. At the same time, with the explosive growth of photovoltaic demand and the steady increase of other demand such as automobiles, POE demand will maintain rapid growth. According to the judgment of demand and supply under the neutral assumption, the gap between supply and demand of POE will continue to widen until 2025. Company layout POE high-end new material project, the construction of POE joint plant, α-olefin plant used in the process for the introduction of mature process package, significant advantages.

Assuming that the company's POE and alpha olefin production capacity will be put into production one after another in 2025, according to the contribution of six months' profit at full load, regardless of future equity expansion, the company's net profit from 2023 to 2025 is expected to be 110 million yuan, 190 million yuan and 1.24 billion yuan, corresponding to the closing price of August 16, 2023, the PE is 46.9,28.0 and 4.2 times, maintaining the "buy" rating.

Risk hint

1, the terminal demand drops sharply; 2, the progress of the project is not as expected; 3, the new business development is not as expected.