Incident: The company released its 2023 annual report. The company achieved operating income of 136.1 billion yuan, -10% year-on-year, and net profit of 435 million yuan, year-on-year +1,515 million yuan; of these, Q4 achieved revenue of 34.6 billion yuan in a single quarter, +20% year-on-month, -7% month-on-month, and net profit of 230 million yuan, year-on-year +2.6 billion yuan, +76% month-on-month.
Comment:
Aromatic hydrocarbons are booming, polyester price spreads have improved, and the company's performance increased significantly in 23 years: in 2023, the average prices of Brent crude oil, naphtha, PX, PTA, and POY were 82 US dollars/barrel, 649 US dollars/ton, 8,579 yuan/ton, 5,862 yuan/ton, and 7,703 yuan/ton, respectively, compared with -17%, -17%, -2%, -3%, and -4%, respectively. The price differences for naphtha cracking, PX, PTA, and POY were -79 US dollars/ton, 1,029 yuan/ton, 379 yuan/ton, and 1,111 yuan/ton, respectively, compared with +35 US dollars/ton, -363 yuan/ton, -81 yuan/ton, and +43 yuan/ton, respectively. As downstream demand continues to pick up, aromatic hydrocarbons have maintained a high boom, and polyester price spreads have improved. The company accurately grasped market trends. On the one hand, it actively implemented the technical upgrading work of the first phase of the Brunei refining and chemical project to optimize the product structure; on the other hand, it continued to increase technological upgrading and transformation efforts in the polyester sector, increase the proportion of differentiated products, and promote strong production and sales of polyester products. As the industry's prosperity gradually improved, the company's profitability improved markedly in '23, and its performance grew significantly.
Brunei Phase II is progressing in an orderly manner, and PTA and polyester production capacity continues to expand: 1) On November 8, 2023, the Brunei Refining and Chemical Phase II project signed a project implementation agreement, and work such as embankment dredging is currently being carried out in an orderly manner. The project includes 14 million tons of refining, 6 million tons of refined oil products, 2 million tons of PX, 2.5 million tons of PTA, 1 million tons of PET, and 1.65 million tons of ethylene and downstream products. 2) The Hainan Yisheng PTA project with an annual output of 2.5 million tons was put into operation at the end of '23. The first set of 600,000 tons/year unit with an annual output of 1.8 million tons of PET has already been tested. The two sets of devices with a total annual output of 1.2 million tons will be tested in 24 years. 3) On April 9, 2024, Guangxi Hengyi successfully completed the first large-scale equipment with an annual output of 1.2 million tons of caprolactame-polyamide industry integration and supporting engineering, marking that the project construction has fully entered the substantial phase of equipment installation. 4) Other projects under construction include a new environmentally friendly differentiated chemical fiber project with an annual output of 1.1 million tons. Major projects are progressing steadily, and the company's performance is expected to further increase after the projects are gradually put into production.
Stock repurchase+employee shareholding shows confidence in the company's future development: In 2023, the company implemented the third and fourth phase of the share repurchase plan. The number of shares repurchased was 15.81 million shares, accounting for 4% of the company's total share capital, with a transaction amount of 1.1 billion yuan; as of March 31, 2024, the fourth phase share repurchase plan had a cumulative total of 64.58 million shares, accounting for 2% of the company's total share capital and a transaction amount of 400 million yuan.
The total repurchase amount of the company's four-phase share repurchase plan was 2.7 billion yuan. Meanwhile, in 2023, the company implemented and purchased the fifth phase of the employee stock ownership plan and purchased 87.17 million shares of the company's shares, accounting for 2% of the company's total share capital. The transaction amount was RMB 700 million, and the cumulative amount of the phase 5 employee shareholding plan was 4.4 billion yuan. Stable share repurchase plans and employee stock ownership plans demonstrate confidence in the company's future development.
Profit forecasting, valuation and ratings: Considering the weak recovery in downstream demand, the refining and chemical industry's prosperity has not recovered as much as we had previously anticipated, so we lowered the company's profit forecast for 2024-2025 and added a profit forecast for 2026. The company's net profit for 2024-2026 is expected to be 9.42 (down 52%)/13.55 billion yuan (down 48%)/RMB 1,615 billion, respectively. The converted EPS is 0.26/0.37/0.44 yuan respectively. The company's PTA and polyester production capacity continues to expand, and Brunei Phase II is progressing steadily. We are optimistic about the company's future growth space and maintain the company's “buy” rating.
Risk warning: Crude oil prices fluctuate greatly, downstream demand recovery falls short of expectations, and project implementation progress falls short of expectations.