Key points of investment
Event: On March 1, 2024, the company released the “Double Improvement of Quality and Return” action plan, which aims to improve the quality of the company's business development, investment value and level of sustainable development, and actively maintain market stability.
We attach great importance to shareholder returns and actively carry out repurchases to increase our holdings. 1) Continuously improve the shareholder value return mechanism. Since its listing, the company has updated the “Shareholder Return Plan for the Next Three Years” several times. By the end of 2023, the company had paid 13 cash dividends, achieving a total of nearly 7.5 billion yuan in cash dividends.
2) Increase holdings and buybacks to boost market confidence. Since the first share repurchase in March 2022, the company has successively implemented the three-phase share repurchase plan. By the end of February, the cumulative repurchase amount of the three-phase repurchase plan reached 6.98 billion yuan, accounting for about 5.5% of the company's total share capital. Furthermore, on January 18, 2024, Rongsheng Group, the controlling shareholder of the company, announced an increase in the company's shares by 1-2 billion yuan without setting a price range for the increase, further demonstrating confidence in the company's business prospects.
The integrated, globalized and innovative layout continues to increase, actively promoting the quality and efficiency of the industrial chain. 1) The company is a leading global petrochemical enterprise. The industrial chain covers various links such as refining, chemicals, chemical fibers, etc., and actively develops new energy, new materials and other related products. Among them, the company relied on the Zhejiang Petrochemical platform to extend the layout of three major new material projects downstream, with a total investment scale of over 100 billion dollars. 2) In addition, the company is actively developing a global layout, introducing Saudi Aramco as a strategic investor in 2023. In January 2024, the company further signed a “Memorandum of Understanding” with Saudi Aramco to discuss matters such as the acquisition of 50% of Saudi Aramco's shares in Jubail Refining and Chemical Company and Saudi Aramco's acquisition of no more than 50% of CICC's shares. At the same time, the two sides plan to jointly develop the Rongsheng New Materials (Zhoushan) project, with a total investment of 67.5 billion dollars. It is planned to expand the layout of new material products such as PEO, PTT, CHDM, and PCT, and further highlight the refined properties.
Profits from the export of refined oil products have rebounded, and the boom in the aromatic hydrocarbon industry chain has moved upward. 1) Since the beginning of the year, the price spread of overseas refined oil products showed a recovery trend. As of the end of February 2024, the average monthly price difference of gasoline and diesel in Southeast Asia was 15/26 US dollars/barrel, compared to the average price in Q4, +7/1 US dollar/barrel, respectively. In addition, on January 2, 2024, the Ministry of Commerce issued the first batch of refined oil export quotas for 2024. Among them, Zhejiang Petrochemical received a general trade export quota of 1.73 million tons of refined oil products and an export quota of 60,000 tons for low-sulfur marine fuel oil, which is expected to contribute to the company's increased performance in the refined oil sector; 2) PX, thanks to the increase in downstream polyester operating rates and fuel conversion demand, PX continued to perform well in 2023. As of the end of February 2024, PX's average monthly crude oil performance was outstanding. The difference is 431 USD/ton, +21 US dollars/ton compared to the Q4 average. Looking backwards, between 2024-2025, China's PX will add only 3 million tons of additional production capacity, and it is expected that the operating rate and profit center of the industry will move upward.
Profit forecast and investment rating: We maintain the company's 2023-2025 net profit of 10/65/10.7 billion yuan. Based on the closing price on March 1, the corresponding PE is 103.4/16.2/9.8 times PE, respectively, to maintain a “buy” rating.
Risk warning: raw material prices fluctuate, demand recovery falls short of expectations, and competition in the refining and chemical industry intensifies