The company released its report for the first quarter of 2024. In the first quarter of 2024, the company achieved revenue of 46.161 billion yuan, up 10.07% year on year and 7.84% month on month; realized net profit of 4.157 billion yuan, up 2.57% year on year, up 1.07% month on month; realized net profit after deduction of 4.127 billion yuan, up 3.47% year on year. Gross sales margin was 17.6%, +0.1pct year over year and +0.8pct month-on-month. Net sales margin was 9.9%, -0.6 pct year over year, and -0.5 pct month over month. Net operating cash flow for the first quarter was 3.084 billion yuan, down 26% year on year.
Sales in the polyurethane sector increased sharply year on year, and the price spread was relatively steady. Business side: In the first quarter, the company's polyurethane sector achieved revenue of 17.5 billion yuan, +11.5% YoY, and achieved sales volume of 1.31 million tons, +18.0% YoY and +0.8% month-on-month; average price was 13,360 yuan/ton, -5.5% YoY, +0.4% month-on-month; in terms of price difference: The “trade-in” policy drove a steady recovery in demand for downstream appliances, automobiles, etc. According to Wind, aggregate MDI/pure MDI/TDI spreads in the first quarter were +2.6%/+9.7%/-13.9%, respectively, and +2.9%/-2.4% month-on-month respectively. As the basic performance market, the rise in raw material prices successfully achieved price transmission, and pure MDI and TDI price spreads showed relative resilience. Overall, the polyurethane sector increased steadily and consolidated the basic performance market.
Price spreads in the petrochemical sector improved month-on-month, and the Ethylene Phase II and Penglai PDH projects are expected to contribute to growth during the year.
Business side: In the first quarter, the company's petrochemical sector achieved revenue of 18.5 billion yuan, +1.8% year-on-month, and achieved output of 1.39 million tons, +17.8% year-on-year, +1.5% month-on-month, and sales volume of 1.34 million tons. Price spread: According to Wind, the PDH spread in the first quarter was +3.2% year over month, +4.1% month on month, and +9.0% year on month, and +8.3% month on month. Although product prices declined, propane prices on the cost side fell a lot, and the overall price spread increased. The Yantai Ethylene Phase II Project and the Penglai PDH Project are expected to be put into operation in 2024. The distance between Penglai and Yantai Industrial Park is about 40 kilometers. The two major projects will connect the main raw materials through LPG, ethylene and other transportation pipelines, and share the advantages of integration and upstream and downstream synergy.
The volume and price of the fine chemicals and new materials sector have increased and decreased, and new projects are about to be put into operation. In the first quarter, the company achieved revenue of 6.1 billion yuan, +14.3% year-on-month, and achieved sales volume of 440,000 tons, +25.7% year-on-year and +4.8% month-on-month. The average product price was 13,875 yuan/ton, -9.0% year-on-year and -6.7% month-on-month. In terms of new projects, projects such as POE Phase I, citral, flavors and fragrances are expected to be put into operation in the first half of 2024. The company is expected to take the lead in large-scale import substitution in key materials with gaps in domestic production, and the performance of the new materials sector is expected to grow steadily.
Investment advice: Considering product price fluctuations, we expect the company's net profit to be 190/216.248 billion yuan in 2024-2026, corresponding to PE of 14.3/12.6/11.0 times, respectively, to maintain a “buy” rating.
Risk warning: downstream trade-in demand is lower than expected, product prices fluctuate, capacity construction falls short of expectations, etc.