The company achieved net profit of 1,158 billion yuan in 2023, -65.33% YoY. In 2023, the company achieved operating income of 325.112 billion yuan, +12.46% year over year; realized net profit to mother of 1,158 billion yuan, -65.33% YoY, net profit without return to mother of 820 million yuan, or -59.24% YoY. Among them, the company achieved revenue of 86.064 billion yuan in the fourth quarter and net profit to mother of 1,051 billion yuan, reversing losses over the previous year.
Crude oil and coal weakened, and product price differences widened. In terms of raw materials, the petrochemical industry recovered in 2023: the average price of Brent crude oil in 2023 was 82 US dollars/barrel, -17% year over year, and the closing price of Qinhuangdao thermal coal was 970 yuan/ton, -24% year over year, and cost pressure weakened. Price difference: gasoline cracking price difference of 869 yuan/ton, +111% year over year, diesel cracking price difference 562, +11%; PX-naphtha price difference of 389 US dollars/ton, +21% year over year; profit from naphtha to ethylene - 36 yuan/ton, loss reduced by 129 yuan/ton.
New materials projects are progressing steadily
Zhejiang Petrochemical high-performance resin project: 1.2 million tons of ABS, 400,000 tons of EVA, 400,000 tons of LDPE are under construction.
Rongsheng New Materials (Zhoushan): Relying on Zhejiang Petrochemical and Ningbo Zhongjin Petrochemical, it extends downstream to develop fine chemicals and new chemical materials. Currently, construction of the project has begun, and related work is progressing in an orderly manner.
Rongsheng New Materials (Taizhou): The project company has been established, focusing on high-end polyolefins, special rubbers and elastomers, engineering plastics, fine chemicals and specialty chemicals, and cutting-edge new materials. Currently, preliminary work is progressing in an orderly manner.
Refining and chemicals go overseas and embark on a new journey of internationalization
Introduction of Saudi Aramco War Investment: In 2023, the company reached a strategic cooperation with Saudi Aramco. AOC, a wholly-owned subsidiary of Saudi Aramco, acquired 10% of Rongsheng Petrochemical's total share capital plus 1 share, becoming the company's second-largest shareholder. At the same time, Rongsheng Petrochemical and its subsidiaries signed a series of agreements with Saudi Aramco and related parties, which is of great significance in improving the company's crude oil guarantee capabilities, broadening overseas sales channels, and achieving a strategic layout. This was the first year of the company's internationalization.
Setting up a second overseas base: On January 2, 2024, the company and Saudi Aramco signed a memorandum of understanding. The two sides discussed the acquisition of shares between Jubail Refining and Chemical Company and CICC.
After the signing of the above memorandum of understanding, the company and Saudi Aramco have actively advanced. Currently, they have reached agreement on some matters and signed a “Cooperation Framework Agreement”. 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 Saudi Aramco's wholly-owned subsidiary SASREF, and jointly develop expansion projects for CICC and SASREF according to the share ratio.
Profit forecast estimate: Affected by the slump in the olefin industry, the 2024/2025 net profit forecast was lowered from 72/10.3 billion to 50/95 billion, and the 2026 forecast was added to 12 billion. The PE corresponding to the stock price on April 26, 2024 was 22/12/9 times, respectively, maintaining the “buy” rating.
Risk warning: the risk of rising crude oil; the risk of industry competition increasing the risk; the risk of production capacity investment falling short of expectations