Incidents:
On March 1, 2024, Dongfang Shenghong issued an announcement on the “Double Improvement of Quality and Return” action plan. As a leading enterprise in the industry, Dongfang Shenghong has always attached importance to investors' interests, firmly established an investor-based concept, promoted the improvement of the company's business development quality, investment value and level of sustainable development, and actively maintained market stability. Based on confidence in the company's future development prospects and recognition of the company's value, the company formulated the “Double Improvement of Quality and Return” action plan.
Investment highlights:
Adhere to strategic strength, stick to strengthening the main business, and deeply cultivate integrated development. Since the restructuring and listing in 2018, the company has become a world-leading energy and chemical enterprise with vertical integration of the entire industry chain and an in-depth layout of new energy and new materials businesses. At the end of 2021, the company quickly entered the field of new energy materials through the acquisition of Silbon Petrochemical, a leading company in the EVA industry. At the end of 2022, after more than 3 years of construction, the 16 million tons/year Shenghong Refining and Chemical Integration Project successfully completed the plant construction and completed the entire process. In 2023, Shenghong's refining and chemical plant load gradually climbed, and the entire industry chain basically operated at full capacity. The company's revenue for the first three quarters of 2023 reached 103.642 billion yuan, +121.89% year-on-year, achieving a historic breakthrough.
Adhering to innovation to drive the future, leading the industry's green and intelligent development path, the company continuously accelerates the construction of technological innovation systems and promotes industrial transformation and upgrading. Follow the development trend of the low-carbon, green and lightweight industry and adhere to product technology innovation. In 2023, the high-melting index hot-melt EVA product independently developed by Sierbon Petrochemical won the “2022 New Chemical Material Innovation Product” award with its pioneering domestic process technology and international advanced product performance.
At the same time, the 800-ton pilot plant of POE, a next-generation photovoltaic film material independently developed by the company, was successfully put into operation in September 2022. In the future, the company is expected to become a world-class leading enterprise capable of supplying both EVA and POE raw materials for photovoltaic films.
Furthermore, the company has always insisted on deepening and exploring green process technology in all aspects of low carbon, zero carbon, and carbon negative. In September 2023, the first domestic 100,000 ton carbon dioxide green methanol plant built by the company in cooperation with the Icelandic Carbon Recycling Company was officially put into operation in Lianyungang, Jiangsu. The company's green carbon negative industry chain of “carbon dioxide capture and utilization - green methanol - new energy materials” has begun to take shape. “Turning carbon into treasure” to produce new energy and new materials not only conforms to current national environmental protection policies, but also conforms to the global trend of reducing carbon emissions. While improving the market competitiveness of enterprises, it injects vigorous vitality and strong impetus into promoting the green upgrading of the petrochemical industry structure.
Focus on shareholder returns and share corporate growth dividends
As of 2022, the company has distributed cash dividends of 2,843 billion yuan for 5 consecutive years, with an average annual dividend payment rate of 73%, which is at the leading level in the same industry. Furthermore, based on confidence in the company's future development prospects and high recognition of the company's value, and in order to fully mobilize the enthusiasm and creativity of employees and enhance the company's cohesion and competitiveness, the company has launched four consecutive employee stock ownership plans since 2020. The company and its controlling shareholders and some employees of affiliated companies all participated, with a total investment of nearly 10 billion yuan. In February of this year, the company announced the fourth phase of the employee stock ownership plan. The controlling shareholder of the company and some employees of its affiliated companies increased their shares in the fourth phase, and they have all completed stock purchases, totaling 2,292 billion yuan.
In August 2023, Mr. Ji Gaoxiong, Vice Chairman and Executive Deputy General Manager of the Company, Mr. Qiu Hairong, Director, Deputy General Manager and Head of Finance, Mr. Ni Genyuan, Chairman of the Supervisory Board, and Mr. Wang Jun, Deputy General Manager and Secretary of the Board of Directors, took the initiative to increase their shares in the company, totaling RMB 40.983 million.
Profit forecasts and investment ratings Taking into account fluctuations in crude oil prices and changes in the prices of the company's main products, we moderately adjust the company's performance expectations. We expect net profit to be 6.63, 56.96, and 7.224 billion yuan for 2023/2024/2025, respectively, and EPS of 0.10, 0.86, and 1.09 yuan/share, corresponding to PE of 104, 12, and 10 times. The company is a world-leading energy and chemical enterprise with vertical integration of the entire industry chain and an in-depth layout of the new energy and new materials business. The “1+N” industrial pattern of “1” core platform+ “N” diversified industrial chains such as new energy, new materials, electronic chemistry, biotechnology, etc., has taken shape. In addition, it plans to introduce a battle to invest in Saudi Arabia and Aramco to strengthen petrochemical cooperation, be optimistic about the company's future growth, and maintain a “buy” rating.
The implementation of risk warning policies, the progress of new production capacity construction falls short of expectations, the performance of new production capacity contributions falls short of expectations, fluctuations in raw material prices, changes in environmental protection policies, and a sharp decline in the economy.