2023 results fall short of our expectations
The company announced its 2023 results: revenue of 92.9 billion yuan, a year-on-year increase of 13%; net profit to mother - 1.3 billion yuan, a year-on-year loss of 1.5 billion yuan, lower than our expectations, mainly due to 1) the company's impairment preparation of 477 million yuan; 2) the participating company Shanghai Secco lost 1,855 million yuan after tax in 2023, and an investment loss of 334 million yuan recorded by the Shanghai Petrochemical Equity Law.
At the operating level, trade profits for refined petroleum products/chemical products/petrochemical products were -230/-14.98/0.42 billion yuan respectively. Compared with the three major sectors of 0.001/-37.24/013 billion yuan in 2022, chemical products improved year-on-year.
The company paid a dividend of 0 yuan/share in 2023, mainly due to negative net profit attributable to the company's shareholders achieved in 2023.
Development trends
The operating rate is expected to gradually recover. Since the explosion occurred in 2022, the company has strictly managed and basically eliminated all safety hazards. Looking ahead, we judge that the company's plant operating rate was at or below the same period in 1Q24. As industry sentiment improved, the plant operating rate gradually returned to full production.
2024 Chemical profits or remain stable. We judge that demand in the chemical industry is still low in 2023, while overall chemical profits in 2024 are relatively lackluster, mainly 1) olefins: new production capacity continues to be invested, and profits are difficult to improve significantly; 2) Aromatics: Before Yulong Petrochemical was put into production in 2025, there was basically no large-scale new production capacity, and demand continued to grow steadily.
Refining profits are expected to improve year over year in 2024. We judge that refining profits are expected to improve year on year in 2024. The main factors are 1) the variety of imported crude oil has been optimized; 2) the OSP (Saudi Arabia's official crude oil price for Asian buyers) premium has declined; 3) the oil price remains high: the CICC Group determined that the price of Brent crude oil in 2024 was 85-90 US dollars/barrel, a slight increase over the previous year.
Profit forecasting and valuation
We kept our 2024 profit forecast largely unchanged, and introduced a profit forecast of 1 billion yuan for 2025 for the first time. We maintain the A/H target price of HK$3.1/1.2 unchanged, corresponding to 1.3/0.46x 2024 and 1.3/0.42x 2025 net market ratios and 12%/8% upward space, and maintain the “outperforming industry” rating for A/H shares. Current A/H stock trading is 1.2/0.4 times 2024 and 1.1/0.4 times 2025 net market ratio.
risks
International oil prices have fluctuated greatly, and carbon fiber projects have fallen short of expectations.