Net revenue and profit increased year-on-year in the first quarter of 2024, and declined month-on-month. The company's revenue for the first quarter of 2024 was 8.23 billion yuan (+22% YoY, -6% month-on-month), net profit attributable to mother was 1.42 billion yuan (+20% YoY, -19% month-on-month), and net profit not attributable to mother was 1.48 billion yuan (+16% YoY, -18% YoY). Net interest rates declined mainly due to the year-on-year increase in sales of the company's main products.
The production and sales volume of the company's main product, polyolefin, increased year-on-year, and the environment is relatively stable. The Ningdong Phase III 1 million ton olefin project contributed to the increase in production capacity. The company's polyolefin production and sales increased year-on-year in the first quarter of 2024, and the environment was relatively stable. The first phase of the 3 million tonne olefin project in Inner Mongolia is expected to be put into operation in the fourth quarter of this year. Rapid expansion of production capacity is driving up the company's profit scale. Due to factors such as increased production capacity supply and weak overall demand, polyolefin prices declined in the first quarter of 2024. The average sales price of polyethylene/polypropylene without tax was 6924/6524 yuan/ton, respectively (-3%/-6% YoY, -1%/-3% month-on-month).
Oil prices have maintained a high trend under the influence of factors such as geopolitics and core supply-side production reduction strategies. The cost of oil-to-olefin in mainstream processes is still higher than Baofeng Energy's coal-to-olefin, and the company's olefin sector still has a cost advantage.
Coke production, sales and prices both declined month-on-month, hampering performance. In the first quarter of 2024, the company's coke production/sales volume was 171.9/1.75,000 tons, +7%/+11%, and -5%/-2% month-on-month, increasing year-on-year and decreasing slightly month-on-month; the average sales price without tax was 1,533 yuan/ton (-14% YoY, -9% month-on-month).
Coking coal and coke prices fluctuated and declined in the first quarter, mainly due to weak demand, such as declining demand for real estate and production cuts in steel mills due to losses. It is expected that the coke market will remain weak in the second quarter, and downstream stocks will need to be replenished to boost the boom.
The price of coking coal fell. The average purchase price of the company's main raw material, gasified feedstock coal/coking refined coal/thermal coal in the first quarter of 2024 was 600/1156/452 yuan/ton, -19%/-21%/-17% compared with the same period last year.
According to Wind data, in the first quarter of 2024, the price of the original coal pit of 5,200 kilocalories in Inner Mongolia was 672 yuan/ton (-25% YoY, -9% month-on-month). Up to now, the average price in April was about 589 yuan/ton, and coal prices continued to decline; Mongolian coking coal site price was 1,414 yuan/ton (+3% YoY, -9% month-on-month). It is expected that thermal coal prices may continue to face downward pressure in the short term. As demand for coal increases in summer, there may be additional inventories driving up thermal coal prices. As far as coking coal is concerned, the current inventory level in the industrial chain is low. Once a recovery in market demand triggers stock replenishment, there may also be a phased increase.
Risk warning: Project production falls short of expectations; raw material prices rise; downstream demand falls short of expectations, etc.
Investment advice: The rapid expansion of the production capacity of the company's main product, polyolefin, is the core source of future profit growth, and the company's own coal mine is building a strong profit base. We maintain the company's 2024-2026 net profit forecast of 82.91/138.72/14.104 billion yuan, corresponding EPS of 1.13/1.89/1.92 yuan, and PE corresponding to the current stock price of 14.6/8.7/8.6X, maintaining a “buy” rating.