Core view: Qi Xiang Tengda benefits from improved product price spreads and collaborative advantages of controlling shareholders: (1) Improved product price spreads. In the second half of 2023, the price spread of the company's main products maleic anhydride, methylacetone and MTBE continued to widen, and the company's gross profit margin and net profit margin increased month-on-month. (2) Controlling shareholders cooperate. Shanneng Group is an indirect controlling shareholder, and the company is expected to take advantage of strategic synergy with Shanneng Group.
The company is a leading global company for methylacetone and maleic anhydride. The company is mainly engaged in chemical manufacturing business. Since its establishment, it has been committed to converting carbon 4 into R&D, production and sales of high-value-added fine chemical products, while steadily advancing the layout of the carbon 3 industry chain. At the end of 2022, the design production capacity of the company's methylacetone unit reached 260,000 tons/year, accounting for about 50% of domestic production and sales share, ranking first in the country. With a production capacity of over 400,000 tons/year, it is the largest maleic anhydride manufacturer in the world.
There is a lot of production capacity under construction, opening up room for the company's future growth. By the end of 2022, the company's n-butane line, isobutane line and butylene line production capacity was 40 million tons/year, 950 million tons/year, and 90,000 tons/year, respectively. The company continues to expand production capacity. The projects under construction mainly consist of 200,000 tons/year isononyl alcohol project and 100,000 tons/year PMMA project. The 300,000 tons/year propane oxide project production line has been completed, opening up room for the company's future growth.
The company is expected to benefit from the drop in the price of carbon 4 as a raw material. After the implementation of the policy of imposing a consumption tax on isooctane, the price of isooctane continued to fall. The company mainly uses C4 to produce products such as maleic anhydride, methylacetone, and MTBE. The production of isooctane in 2022 was only 250,000 tons, and the impact of the consumption tax on the company's revenue is limited. At the same time, due to the drop in C4 prices, the cost of procuring raw materials for the company is expected to decrease, which is expected to benefit.
It is expected that it can exert a synergetic advantage with the mountains. Shanneng New Materials is the company's indirect controlling shareholder. Using Shanneng Group's resource advantages, the company is expected to continue deepening strategic collaboration with Shanneng New Materials and Shanneng Group in the industrial sector to enhance the company's market competitiveness and industry influence.
Profit forecasting and investment ratings. We expect the company's net profit to be -3.55, 5.41, and 1,572 billion yuan respectively from 2023 to 2025, and EPS to be -0.13 yuan, 0.19 yuan, and 0.55 yuan, respectively. According to 2024 EPS and 40-45 times PE, corresponding to a reasonable value range of 7.60-8.55 yuan, corresponding to the PB valuation of 1.58-1.78 times, maintaining the “superior to the market” rating.
Risk warning. Product prices fell, and production capacity fell short of expectations.