Incident 1: The company released its report for the first quarter of 2024. With 2024Q1, the company achieved operating income of 58.4 billion yuan in a single quarter, +4% YoY and -5% month-on-month; realized net profit of 2.1 billion yuan, +110% YoY, +78% month-on-month; realized net profit after deduction of 1.8 billion yuan, +212% YoY and +78% month-on-month.
Incident 2: The company announced the signing of a memorandum of understanding between the controlling shareholder and Saudi Arabian Oil Company. The company received a notice from the controlling shareholder Hengli Group Co., Ltd. (hereinafter referred to as “Hengli Group”) on April 22, 2024, and has signed a “Memorandum of Understanding” with Saudi Arabian Oil Company (hereinafter referred to as “Saudi Aramco”).
Comment:
Aromatic hydrocarbons maintained a high boom, and polyester price spreads continued to improve. 24Q1 performance increased dramatically: in Q1 of 2024, naphtha cracking, refining, PX, PTA, and FDY prices were -64.3 US dollars/ton, 806 yuan/ton, 1,179 yuan/ton, 396 yuan/ton, and 2164 yuan/ton, +814 yuan/ton, +16 yuan/ton, +32 yuan/ton, respectively, +19 US dollars/ton, +70 yuan/ton, and -70 yuan/ton, respectively. 349 yuan/ton, -7 yuan/ ton, +26 yuan/ton. In Q1 2024, PX and pure benzene in the aromatic hydrocarbon industry chain maintained a high boom, and downstream demand for polyester chemical fibers and functional films recovered further; in addition, benefiting from the decline in the coal price center and the relative stability of crude oil costs, the company's unique competitive advantage of oil and coal in the refining and chemical industry was further highlighted, driving the company's competitive advantage in Q1.
Continue to implement a high dividend policy and pay attention to shareholders' return on investment: Since its listing, the company has maintained a high percentage of cash dividends, and profit distribution has maintained continuity and stability under the premise of sustainable development. In 2023, the company's annual profit distribution plan is: cash dividend of 0.55 yuan (tax included) per share, and the cash dividend amount accounts for 56.07% of net profit to mother. After completing this dividend, the company has accumulated dividends of 22.371 billion yuan since the restructuring and listing in 2016, accounting for 41.08% of the cumulative net profit to mother, which greatly exceeds the supporting capital raised by the company from the capital market. A stable dividend policy boosts shareholder returns and continues to build valuable “growth+return” listed companies.
The year 24 ushered in a major year of production, continuing to build a new material industry chain with high added value: by the end of 2023, 1) the company's 1.6 million tons/year high-performance resin and new materials project located in Changxing Island Industrial Park in Dalian, with downstream chemical plants in operation one after another, and is expected to be fully put into operation in Q2 in 2024; 2) Kanghui New Materials Fenhu Plant functional film project has now been put into operation one after another. 12 additional functional film production line projects at the Nantong base are expected to be put into operation in the second half of 2024; 3) 5 million tons/year PTA in Huizhou The project has already started Put into operation; 4) Kanghui New Materials Yingkou factory lithium battery diaphragm project is expected to be put into production in the first half of 2024. The Nantong plant produces 1.2 billion square meters of wet lithium battery separators and 600 million square meters of dry lithium battery separators. One production line that has already been tested is expected to reach production in the first half of 24, and the rest of the production lines are expected to be tested in 2024. As the projects under construction progress steadily, it will further consolidate the depth of collaboration and industrial depth of the company's new chemical materials business segment, effectively expand the production capacity and scale of the company's new polyester materials business segment, and promote the company's future high-end production capacity layout. At the same time, the perfect layout of the downstream industrial chain will also bring about a considerable increase in performance and reduce performance volatility, and there will still be high growth potential in the future.
A “Memorandum of Understanding” was signed with Saudi Aramco to continue deepening strategic cooperation between China and Saudi Arabia: On April 22, 2024, Hengli Group, the controlling shareholder of the company, signed a “Memorandum of Understanding” with Saudi Aramco. According to the Memorandum of Understanding, the two sides are in negotiations: 1. Saudi Aramco (or a related party controlled by it) plans to acquire shares of 10% of the company's issued share capital plus 1 share from Hengli Group; 2. Hengli Group will support and facilitate strategic cooperation between the company (and/or related parties controlled by it) and Saudi Aramco (and/or its controlled related parties) in crude oil supply, raw material supply, product procurement, technology licensing, etc. The signing of this memorandum of understanding means that strategic cooperation between China and Saudi Arabia continues to advance in depth. The company and Saudi Aramco are upstream and downstream in the industrial chain. As the strategic partnership between the two sides progresses steadily, it is conducive to ensuring the company's continuous supply of raw materials, deepening cooperation between the two sides in technology research and development, and further expanding the company's overseas sales channels for chemical products and enhancing the company's market influence.
Profit forecast, valuation and rating: Aromatic hydrocarbons continue to be booming, polyester price differences continue to be fixed, and the company's profitability has increased. Therefore, we have raised the company's profit forecast for 2024-2025 and added a profit forecast for 2026. The company's net profit for 2024-2026 is 90.56 (up 8%) /101.46 (10% increase)/11.521 billion yuan, respectively. The corresponding EPS is 1.29/1.44/1.64 yuan, maintaining the company's “buy” rating.
Risk warning: investment in new production capacity falls short of expectations, global economic recovery falls short of expectations, fluctuations in international crude oil prices, environmental policy risks.