Company news
The company's recent situation
The company announced the sixth phase of the employee stock ownership plan. The total amount of capital initially proposed to be raised in the employee shareholding plan is not more than 800 million yuan. The specific amount is determined based on actual investment contributions and financing amounts. The share repurchase price of the listed companies to be transferred is 6.61 yuan/share, which is 48.18% of the company's average share repurchase price of 13.72 yuan/share.
reviews
Low production capacity will be launched in 2024, so I am optimistic that the filament boom will improve. We judge that the pace of expansion in the industry has slowed in 2024-25. According to the current production plan, we expect to add a total of about 1.1 million tons of additional production capacity in 2024 (in addition, Hengyi Petrochemical's 750,000 tons of production capacity was relocated for a short time), and the additional production capacity will be within 2 million tons in 2025 (we expect the compound growth rate of the industry's production capacity to be about 2.6% in 2024-2025), all lower than the growth rate of demand (we expect 5-6%). We expect the popularity of polyester filament to increase further in 2024; the company is the third-largest producer of filament in China, with a production capacity of about 8 million tons/year. We expect a slight loss in polyester profit per ton in 2023, which is expected to gradually improve in 2024.
The nylon industry chain is gradually cashing in on profits. The company currently has a caprolactame-nylon production capacity of 400,000 tons/year (50% equity), and we estimate that the caprolactam industry will have a certain profit in 2023; in the future, as the company starts production of 600,000 tons of nylon in Qinzhou, Guangxi by the end of 2024, the overall profit is expected to increase. According to Baichuan Yingfu statistics, the net profit per ton of caprolactam is about 1,000 yuan/ton (as of the end of 2023); in 2024-25, there will be almost no new production capacity for nylon in the country, and we judge that the demand growth rate is expected to reach 7-8%. The industry boom is good, and the caprolactam and nylon industry chain will maintain a medium to high level of prosperity.
The second phase of the Brunei Refining and Chemical Project continues to advance. The company's Brunei Phase II 14 million ton project is progressing steadily. After the second phase of the project is completed, an “olefin-polyolefin” industry chain will be added. We judge that this will help raise the level of refining and chemical integration of the Brunei project and further enhance the advantages of collaborative operation between upstream and downstream industries.
The employee stock ownership plan shows the company's confidence in long-term development. The company introduced the fifth employee shareholding plan in July 2023, with no more than 700 million yuan in capital raised. The controlling shareholders simultaneously set up a special plan, increasing their holdings by no more than 300 million yuan. This time, the company once again introduced the sixth phase of the employee stock ownership plan (the price to be transferred to the listed companies to repurchase shares is 6.61 yuan/share), raising no more than 800 million yuan in additional capital, further demonstrating confidence in long-term development.
Profit forecasting and valuation
As the PTA industry's boom fell short of expectations, we lowered 2023/2024 net profit by 16/ 11% to $470 million, respectively, and introduced a profit forecast of 850 million yuan for 2025 for the first time. The current share price corresponds to 38/31 times the 2024/25 price-earnings ratio. Maintaining an outperforming industry rating, taking into account the high popularity of nylon and polyester filaments and the market valuation center, we kept our target price of 7.3 yuan unchanged, corresponding to 39/31.5 times the 2024/25 price-earnings ratio, with 2% room to rise compared to the current stock price.
risks
Oil prices fell rapidly, and approval of new projects fell short of expectations.