In the first three quarters of 2023, the company achieved operating income of 103.642 billion yuan, an increase of 121.89% over the previous year; net profit of the mother was 2,479 billion yuan, an increase of 57.15% over the previous year. The third quarter of 2023 achieved revenue of 37.743 billion yuan, up 129.22% year on year and 3.79% month on month; net profit was 798 million yuan, up 1667.41% year on year, down 17.13% month on month. The company plans to introduce a war to invest in Saudi Aramco to enhance market confidence. At the same time, as industry sentiment recovers, business performance is expected to improve and maintain buying ratings.
Key points to support ratings
Prices of refined and chemical products have increased, and expenses have increased during this period. The release of production capacity from integrated refining and chemical projects, compounded by the rise in refining and chemical products, led to a significant increase in operating income in the third quarter. According to Baichuan Yingfu statistics, the average PX/PTA market price for the third quarter of 2023 was 8635.33/6010.55 yuan/ton, up 1.37%/2.46%; the average xylene/polyethylene/polypropylene market price was 8213.58 /8223.34/7567.58 yuan/ton, up 9.69% /3.01% /2.36% month-on-month; and the average gasoline/naphtha market price was 9187.35 /7999.89 yuan/ton, up 3.35% /3.46% month-on-month. Affected by the increase in turnover expenses, the company's gross sales margin in the third quarter was 11.87%, a decrease of 0.99 pct over the previous month. In addition, sales expenses, R&D expenses, and financial expenses were 98 million yuan, 167 million yuan, and 967 million yuan respectively, up 106.63%, 30.65%, and 82.19%, respectively, from the previous year. In the future, as industry prosperity recovers, the company's profitability is expected to gradually improve.
The plan is to introduce Saudi Aramco war investment, bringing international cooperation to a new level. On September 27, Jiangsu Shenghong Petrochemical Industry Group Co., Ltd. (“Petrochemical Industry Group”), a wholly-owned subsidiary, and Saudi Aramco Asia Company Limited (Aramco Asia), a subsidiary of Saudi Aramco, signed a framework agreement. The main contents include: (1) Saudi Aramco or its affiliates intend to become strategic investors in the petrochemical industry group and intend to hold minority shares in the target company; (2) the two sides are interested in long-term procurement and supply of crude oil and other raw materials, chemical products and fuel product sales, and high value-added technology licenses. Collaborate. The company's cooperation with Saudi Aramco is a strategic layout that extends the upstream and downstream integration process. It not only guarantees a stable supply of upstream raw materials, but also provides support for the expansion of the downstream new materials field, and helps the company accelerate international development.
New materials and new energy projects are progressing in an orderly manner. The company is actively promoting the “million ton EVA” strategic goal. Hongjing New Materials is building 3 200,000 ton photovoltaic EVA installations. Later, the company will also plan 100,000 tons of high-end hot melt EVA installations. At the same time, the company plans to build 200,000 tons/year α-olefin units, 300,000 tons/year POE units, 300,000 tons/year butyl octanol units, 300,000 tons/year acrylic acid and ester plants, and 240,000 tons/year BPA units to further expand high-end applications in downstream materials business. In the future, the new materials business is expected to become the company's new performance growth pole.
valuations
Considering that crude oil prices on the cost side are still high, and demand downstream in the olefin industry chain is weak, the profit forecast has been lowered. The company's net profit for 2023-2025 is estimated to be 3.163 billion yuan, 5.205 billion yuan, and 8.291 billion yuan, respectively. The company's earnings per share for 2023-2025 are expected to be 0.48 yuan, 0.79 yuan, and 1.25 yuan, respectively, and the corresponding PE is 21.8 times, 13.2 times, and 8.3 times, respectively. Based on the scarcity of Dalianhua's high-quality assets, the company's operating performance is expected to improve in the future as industry prosperity recovers, maintaining the company's rating as a purchase.
The main risks faced by ratings
Crude oil prices fluctuated sharply; the economy declined sharply; policy risks led to production restrictions or demand falling short of expectations, etc.