Company announcement: In 2023, the company achieved revenue of 325.11 billion yuan, up 12.5% year on year, and achieved net profit of 1.16 billion yuan, down 65.3% year on year; of these, Q4 achieved operating income of 86.06 billion yuan, up 34.5% year on year, up 1.8% month on month, and realized net profit of 1.05 billion yuan, up 3.16 billion year on year, down 14.9% month on month, in line with our expectations. The company plans to distribute a total of 957 million yuan in cash dividends in 2023, with a corresponding dividend ratio of 82.7%.
23 The company's expense ratio increased slightly throughout the year, and the number of projects under construction increased significantly. The company's expense ratio reached 4.9% during the 2023 period, up 0.9 pct year-on-year. The increase was mainly due to R&D expenses and financial expenses. In 2023, the company's R&D expenses increased 50% year on year, mainly due to the company's downstream plans to increase investment in R&D of several high-end new materials; financial expenses increased 36% year over year, mainly due to the increase in the company's interest expenses. On a quarterly basis, the cost rate reached 3.6% during the 23Q4 period, down 2.2 pct from month to month, mainly due to the decline in R&D expenses. In 2023, the company's projects under construction increased 67% year-on-year to 40.99 billion, mainly due to increased investment in high-performance resins, high-end new materials, and Jintang new materials projects. It is expected that the new projects will be completed and put into operation in 25-26, which is expected to drive the company's performance upward.
The profit of DaRefining & Chemical has recovered, and it is expected to continue to improve in the future. With demand picking up, the company's price difference has been fixed to a certain extent. In 2023, the company's petrochemical sector achieved gross profit of 36.73 billion yuan, an increase of 21.5% over the previous year; the gross margin level reached 12.37%, an increase of 1.1 pct over the previous year. We estimate that the price difference of the company in 2023 was about 1,507 yuan/ton, an increase of about 6% over the previous year. Considering that oil prices remain high and fluctuating in 2024, refining and chemical is expected to benefit from inventory earnings brought about by higher oil prices. In the future, as the bottom of chemical prices picks up, refinery profits are expected to continue to improve.
Profits in the chemical fiber sector are basically flat, and the boom is expected to increase. In 2023, the polyester filament industry continued the pattern of oversupply and demand due to the increase in production capacity, but due to the gradual recovery of the epidemic, industry demand gradually picked up, and the profit center increased slightly. We calculate that the 2023 POY/FDY/DTY price difference was -1%/+9%/0%, and the company's chemical fiber sector achieved gross profit of 472 million yuan in 2023, which was basically the same as the previous year. Looking ahead to 2024, the price gap between filament and PTA is expected to recover as the industry landscape improves. According to data from the Chemical Fiber Information Network, considering the withdrawal of backward production capacity, domestic polyester filament production capacity is expected to increase by a net of 530,000 tons in 2024. The new production capacity is relatively small in the future, and the filament boom is expected to rise. Furthermore, due to PTA's poor profits, there are expectations that old devices will be repaired and discontinued. Supply and demand are expected to narrow, and the economy is expected to continue to recover.
Strengthen cooperation with Saudi Aramco to open up room for long-term development. According to the company's announcement, on January 2, 2024, the company and Saudi Aramco signed a “Memorandum of Understanding”. The main content is that the two parties intend to separately sell and purchase 50% of each of Rongsheng Petrochemical's wholly-owned subsidiary CICC and SASREF's wholly-owned subsidiary of Saudi Aramco, and to jointly develop CICC and SASREF expansion projects according to the share ratio. The cooperation between the two sides also gives the company more room for growth in the future development.
Investment analysis opinion: Considering the double pressure on the company's costs and product side, and the company's industry sentiment has changed in the past year, we adjusted the company's 2024-2025 performance, which lowered oil prices and downstream chemical price forecasts; at the same time, due to normal circumstances where new refineries require maintenance within 3 years, the operating rate level of the refinery was lowered; since the domestic PTA and aromatics industry is still in the production cycle, the profitability level of aromatics and olefins was lowered; the gross margin level of aromatics and olefins was lowered in 2024-2025; the gross margin level of the company's main products was lowered in 2024-2025 3.2 billion, 6.2 billion (not considering investment income). Therefore, we lowered our 2024-2025 profit forecast to 60.30 billion and 10.540 billion (originally 13.514 billion, 17.595 billion), and added a 2026 profit forecast of 15.173 billion, corresponding PE of 18X, 11X, and 7X, respectively. Referring to the PE average value (26) of comparable companies Lianhong Xinke and Huajin Co., Ltd., considering that the company has the advantage of a large refining and chemical platform, and that Saudi Aramco's deep participation gives the company more room to grow, we gave the company a price-earnings ratio of 24 times in 2024 to maintain a “buy” rating.
Risk warning: Oil prices fluctuate greatly, the operating rate of refining and chemical projects falls short of expectations, and the commissioning of projects under construction falls short of expectations, etc.