Event: on the evening of October 27, 2023, Hengyi Petrochemical released its third quarter report of 2023. In the first three quarters of 2023, the company achieved operating income of 101.529 billion yuan, down 17.67% from the same period last year; net profit of 206 million yuan, down 84.34% from the same period last year; and basic earnings per share of 0.06 yuan. Among them, in the third quarter of 2023, the company realized operating income of 37.213 billion yuan, down 14.48 percent from the same period last year; realized net profit of 130 million yuan, up 126.25 percent over the same period last year; realized net profit of 119 million yuan, up 125.59 percent over the same period last year; and realized basic earnings per share of 0.04 yuan, an increase of 128.57 percent over the same period last year.
Comments:
Cost-side support and demand pick up, the company's performance continues to improve. On the cost side, in the first half of 2023, under the influence of pessimistic expectations of the global economy, the trend of international oil prices fluctuated downwards; in the third quarter, under the guidance of factors such as the rise in seasonal demand and the extension of production reduction plans of some OPEC+ member countries, international oil prices fluctuated upward, supporting the widening of the price gap of oil products. According to our statistics, in the third quarter of 2023, the price differences of gasoline, diesel and aviation coal in Singapore were 14, 30 and 27 US dollars per barrel, respectively, an increase of 19%, 93% and 96% compared with the previous quarter. In terms of chemicals, the company's main chemicals PX and pure benzene differed slightly in demeanor in the third quarter, with price differences of 3107 yuan per ton for PX and 3189 yuan per ton for pure benzene, respectively. On the polyester side, due to the improvement in the cost side and demand side, the overall profit level of filament products has improved. In the first three quarters, the net profit per ton of the company's main products POY, DTY and FDY were 28 yuan / ton, 173yuan / ton and 161yuan / ton respectively, up 116%, 58% and 153% respectively over the same period last year. In addition, due to the pick-up demand at the polyester end and the destocking of the chemical fiber sector, the net cash inflow from the company's operating activities increased significantly. Overall, the third quarter in the cost-side and demand-side support, the company's refining and polyester sector as a whole, the company's performance continued to improve month-on-month.
The prosperity of overseas oil products is expected to continue, and there is still room for profit in the aromatics sector. In terms of oil products, according to IMF's forecast for Asian economies in October, GDP growth in emerging economies in Asia is expected to reach 5.2% in 2023, an increase of 0.7 pct over the same period last year in 2022, while overall economic growth in Southeast Asia remains strong. In addition, since the opening of China's outbound tourism, the increase in the number of outbound tourists is also expected to boost the demand for oil products in Southeast Asia. In terms of aromatics, after the intensive production of PX in 2022-2023, the incremental production capacity at the supply side of PX may shrink significantly. According to our statistics, it is estimated that the new domestic production capacity from 2024 to 2026 may be only 5 million tons, which is significantly narrower than the 7.7 million tons concentrated production in 2023. The supply-side contraction is expected to support the product price gap to remain strong. We believe that the company deeply ploughs the refined oil market in Southeast Asia, while the production capacity of aromatics is relatively high, and the company's performance is expected to continue to be repaired due to the warming demand in Southeast Asia and the upside of aromatics in the future.
Profit forecast and investment rating: we expect the company's net profit from 2023 to 2025 to be 3.48,11.63 and 1.937 billion yuan respectively, and the growth rate of net profit will be 132.2%, 234.2% and 66.5% respectively. The diluted EPS (diluted) is 0.09,0.32 and 0.53 yuan per share, respectively, corresponding to the closing price on October 27, 2023, the PE is 74.60,22.32 and 13.40 times respectively. We are optimistic about the repair of the company's overseas oil products and aromatics sector, the company's performance will still have a high growth in the future, and we maintain the company's "buy" rating.
Risk factors: the risk of rising prices of upstream raw materials; the risk that the company's new capacity will not be put into production as expected; the risk of lower-than-expected demand repair; and the risk of sharp fluctuations in the prices of crude oil and finished products.