The goals and practices of the Saudi Vision Plan: Saudi Arabia released the “Vision 2030 Plan” in 2016, which sets out clear goals in nine areas: society, economy, and government. Some specific economic goals include: 1) increasing the degree of localization of the oil and gas industry to 75%; 2) increasing foreign direct investment to 5.7%; 3) increasing the private sector's contribution to GDP to 60%; 4) reaching 50% of non-oil exports. This has brought huge opportunities for the export of China's industrial capabilities and industrial standards to the outside world. To achieve the vision plan, Saudi Arabia has begun to actively lay out the entire industrial chain with the strongest crude oil industry and Saudi Aramco leading the way. As can be seen from its layout in the shipping industry, Saudi Aramco is making joint ventures with leading global partners to achieve rapid breakthroughs in the industry.
Rongsheng is expected to start a new development cycle: although Saudi Aramco has cooperated a lot with foreign countries in the petrochemical industry, local projects are an important gripper to achieve the vision plan. Its early partners were mainly European, American, and Japanese companies, but after the announcement of the vision plan, they began to switch to Chinese companies. Rongsheng, on the other hand, has become Saudi Aramco's new partner through the SASREF project, and it can be said that its industrial capabilities have been highly recognized. We believe that Rongsheng is expected to open up new development space, not only in Saudi Arabia, but also in other countries, to obtain new opportunities for cooperation, and play a role in boosting the export of China's petrochemical industry capabilities and standards. Moreover, the profitability of overseas refining and chemical projects is relatively good. If it can obtain support from Saudi Arabia's ethane resources, it can reach the next level, and petrochemical going overseas is expected to reap both fame and fortune.
According to market price changes for each product in the fourth quarter of 2023, we adjusted the price forecast for the company's corresponding products, and adjusted the 2023-2025 earnings per share forecast of 0.11, 0.45, and 1.02 yuan respectively (the original forecast was 0.15, 0.50, 1.11 yuan). We adopted the historical valuation method, referring to the company's average PB (TTM) value of 3.6 over the past 5 years. Considering the bottom of the industry's prosperity and the expected ROE level below the historical level, we gave a 20% discount, and maintained a target price of 13.03 yuan based on the predicted net assets of 4.52 yuan per share for 23 years, corresponding to a target price of 13.03 yuan.
Risk warning
Joint investment plans fell short of expectations; new materials projects fell short of expectations; price spreads for overseas refined oil products narrowed.