Matters:
The company released its 2023 annual report. In 2023, it achieved revenue of 61,469 billion yuan, a year-on-year increase of 21.03%; achieved net profit of 1,086 billion yuan, an increase of 628.44% over the previous year (this is the adjusted caliber for 2022), after deducting non-return net profit of 901 million yuan, an increase of 337.41% year-on-year. Among them, Q4 achieved revenue of 17.269 billion yuan, a year-on-year increase of 34.45% /7.82% month-on-month. Net profit attributable to mother was 199 million yuan, up 140.75% year on year/ down 51.04% month on month; net profit without return to mother was 163 million yuan, up 129.24% year on year/ down 55.83% month on month.
Commentary:
Filament earnings improved significantly year-on-year in 2023, and the PTA sector lost money. On the filament side, earnings recovered significantly in 2023. By the end of 2023, the company had a total filament production capacity of 7.4 million tons. In terms of production and sales, the total production and sales volume of POY+FDY+DTY in 2023 was 680.1/6815,600 tons, respectively, +18.6%/+19.7% year-on-year; in terms of price and profit, the average sales price of POY/FDY/DTY in 2023 was 0.68/0.77/0.85 million yuan/ton, respectively, -2.9%/-2.0%, with gross profit per ton, respectively, the same Ratio +74%/+68%/+75%. In terms of PTA, the company currently has a production capacity of 5 million tons, and achieved sales volume of 494,300 tons in 2023, +34%; sales unit price is 0.52 million yuan/ton, -1.8% year over year; gross profit per ton is -19 yuan/ton, -122% year over year.
The volume and price of 2023Q4 filament increased year-on-year, and the average price decreased slightly month-on-month. Driven by the year-on-year increase in winter fabric orders, the volume and price of Q4 filament increased sharply year over year, and prices narrowed month-on-month. In terms of sales volume, the total sales volume of filament was 1,927,000 tons, of which POY/FDY/DTY sales accounted for 69%/20%/12%, respectively; in terms of unit price, the average price of Q4 POY was 0.67 million yuan/ton, +3.2%/-4.3% month-on-month, and the average price of FDY was 0.77,000 yuan/ton, +5.6% month-on-month, and -2.1% month-on-month.
The profit of 2024Q1 filament is improving, and it is expected to continue to recover after 24 years of improvement in the supply and demand pattern. Since the beginning of 2024, Q1 filament profits have continued to increase month-on-month due to a year-on-year increase in export orders and a sharp increase in the operating rate of domestic downstream looms. Looking ahead to '24, according to our statistics, the additional production capacity of filament in '24 was 1.2 million tons (Tongkun 30+ Xinfengming 40+ Rongsheng 50), and production capacity was shut down to 930,000 tons. That is, the incremental filament production capacity in '24 was only 270,000 tons, and the supply-side growth rate dropped significantly to less than 1%. However, under the trend of consumption downgrading, demand for clothing and home textiles is improving. Demand growth rate reached +12.33% in 2023, and the supply-demand relationship was clearly repaired in 24. Furthermore, on the inventory side, inventory is expected to return to pre-inventory levels in '24. With a healthy recovery in supply and demand, the 24-year filament profit center is expected to open up an upward channel, and the company will enjoy greater flexibility.
The company's steady expansion of production continues to consolidate its position in the industry, and growth can be expected. The company's production capacity has increased at a clear pace in recent years, maintaining the pace of 1-2 sets of production expansion every year. Currently, the company's total filament production capacity is 7.4 million tons. It is expected to increase production capacity by 400,000 tons in 2024 and additional production capacity by 650,000 tons in 2025. In addition, the company is actively expanding its layout upstream. Currently, the company has 5 million tons of PTA production capacity and a long-term plan of 5.4 million tons. They all use the most advanced P8++ technology, which has a certain cost advantage over its peers. In order to further expand upstream, the company participated in the Taikun Petrochemical (Indonesia) refining and chemical project, which is expected to further enhance its cost advantage.
Investment advice: Considering the pace of the company's new production capacity and the pace of profit recovery in the filament industry since 2024, we adjusted our previous profit forecast. We expect the company's net profit to be 19.11/24.34/2,951 billion yuan (24-25 years ago values were 20.28/2,835 billion yuan, respectively), corresponding to 24-26 EPS 1.25/1.59/1.93 yuan, and PE corresponding to the current market value is 12x, 9x, and 8x, respectively. Referring to the company's historical trading PE (TTM) hub, 10 times PE was given in 2025, corresponding to a target price of 15.9 yuan, maintaining the “recommended” rating.
Risk warning: Capacity investment progress falls short of expectations, raw materials fluctuate greatly, and demand side recovery falls short of expectations