Incident: The company issued the “Notice on the Action Plan for Double Improvement of Quality and Return”.
Comment:
The company's main business is developing rapidly and continuing to deepen strategic cooperation between China and Saudi Arabia: the company has firmly implemented the “vertical and horizontal strategy”, built seven production bases in the Bohai Rim Economic Zone, the Yangtze River Delta Economic Zone, and the Hainan Belt and Road Economic Zone, and has formed five major industrial chains of polyester, engineering plastics, and high-value-added polyolefin in Asia. It is one of the world's largest producers of polyester, new energy materials, engineering plastics, and high-value-added polyolefins. Since its listing, the company's business has developed rapidly, with revenue growing from RMB 15.8 billion in 2010 to RMB 289.1 billion in 2022, with a compound growth rate of 27.41%.
At the same time, the company is actively developing a global layout. In 2024, the company and Saudi Aramco signed a “Memorandum of Understanding”, which means that the strategic cooperation between China and Saudi Aramco continues to advance in depth. As the strategic partnership between the two sides progresses steadily, it is conducive to ensuring the company's continuous supply of raw materials, deepening cooperation between the two sides in technology research and development, and further expanding the company's overseas sales channels for chemical products to enhance the company's market influence.
The company's R&D investment increased to accelerate the construction of an innovative development system: in the first half of 2023, the company's R&D investment reached 3.293 billion yuan, an increase of 63.78% over the previous year, mainly due to the increase in R&D expenses of Zhejiang Petrochemical. Looking at R&D expenses over the past three years, R&D expenses in 2021 were 3,915 billion yuan, and R&D expenses in 2022 were 4.367 billion yuan, an increase of 11.54% over the previous year. R&D expenses in the first three quarters of 2023 were 6.166 billion yuan, and the company's R&D investment continued to increase. The company has built first-class R&D platforms such as high-tech R&D centers, academician expert workstations, enterprise technology centers, and postdoctoral research workstations. At the same time, it actively carries out technical exchanges and discussions with foreign countries, actively promotes integrated industry-university-research cooperation, integrates resources from universities, society, enterprises, etc., to jointly improve the level of scientific research, promote technological progress, and jointly build an open, healthy, cooperative and win-win innovation and development system.
Actively increase share holdings and repurchases, and focus on shareholder returns and dividends: Since the company first repurchased shares on March 29, 2022, the company has implemented a total of three share repurchase plans. As of February 29, 2024, the three repurchases have accumulated 552,380,458 shares, accounting for 5.4553% of the company's total share capital. The total transaction amount reached 6.980 billion yuan (excluding transaction fees), conveying to the market the company's confidence in future development and stabilizing stock prices. In terms of shareholder returns, up to now, the company has paid cash dividends 13 times, achieving a total cash dividend of nearly 7.5 billion yuan, demonstrating confidence in the company's future development prospects, attaching importance to shareholder returns, and promoting the company's long-term stable development.
Profit forecast, valuation and rating: The company's new materials project continues to advance, and future growth momentum is sufficient. We maintain the company's profit forecast for 2023-2025, and forecast net profit to mother for 2023-2025 of 11.11/61.82/8.604 billion yuan, respectively, and the corresponding EPS of 0.11/0.61/0.85 yuan, respectively, maintaining the “buy” rating for the company.
Risk warning: The progress of new production capacity investment falls short of expectations, global economic recovery falls short of expectations, and crude oil prices fluctuate.