Key points of investment

Incident: The company released its 2024 quarterly report, achieving operating income of 31.7 billion yuan, +12% year-on-month, -9% month-on-month, net profit of 410 million yuan, +1087% year-on-year, +81% month-on-month, deducting non-net profit of 310 million yuan, +3890% year-on-year, turning a loss into a profit month-on-month. The results were in line with expectations.

Technical reforms completed superposition spread correction, and Brunei's profit increased month-on-month. 1) In terms of production and operation, the Brunei refinery implemented technological transformation work in 2023, leading to loss of production and corresponding increase in technical reform costs. After entering 2024, the impact of technical reform was marginally eliminated. At the same time, after technical reform, the product structure of the first phase of the Brunei project also tended to be optimized. 2) In terms of processing price differences, according to Wind statistics, the difference in gasoline/diesel cracking prices in Southeast Asia during the 24Q1 period was 13/23 US dollars/barrel, respectively, and +6/-1 US dollars/barrel, respectively. Among them, gasoline profits improved significantly. In terms of chemicals, aromatic hydrocarbons still maintained excellent profit performance. Among them, during the Q1 period, the price difference between PX/pure benzene and crude oil was 344/420 US dollars/ton, respectively, and +30/+121 dollars/ton, respectively. Looking backwards, as overseas gradually enters the peak travel season, gasoline price differences are strongly supported. At the same time, benefiting from a decline in supply-side growth, aromatic hydrocarbons are expected to maintain a high level of boom.

The polyester sector is running smoothly, and we are optimistic that supply and demand for filament will improve in 24 years. 1) During the Q1 period, the overall price of polyester chain products rebounded, price differences remained stable, and inventory profit and loss improved month-on-month. According to Wind statistics, during the 24Q1 period, the average price of POY/FDY/DTY/staple fiber was +199/+178/+164/-19 yuan/ton, respectively, and the profit per ton was 68/139/124/-99 yuan/ton, respectively, and +18/+3/-8/-145 yuan/ton, respectively. Among them, the profit performance of long yarn was stable, and the efficiency of staple fiber declined. In terms of PTA, the average PTA price during Q1 was +20 yuan/ton, the average processing price difference was 323 yuan/ton, and -3 yuan/ton month-on-month. Overall, the operation remained low. 2) Looking ahead to the whole year, production expansion in the filament industry is decelerating significantly. According to Baichuan Yingfu statistics, it is estimated that only 900,000 tons of new production capacity will be put into operation in 24 years. Also, considering the marginal withdrawal of backward production capacity, the growth rate of filament production capacity is expected to hit a new low in recent years. As the relationship between supply and demand in the industry tends to repair, filament profits are expected to gradually improve.

Actively implement stock repurchases and employee stock ownership plans, demonstrating confidence in long-term development. 1) Since 2023, the company has successively implemented the third phase and the fourth phase of the share repurchase plan. The third phase has been implemented, with a cumulative repurchase of about 1,112 million yuan. The fourth phase is still in progress. By the end of March, it had accumulated repurchases of 430 million yuan, with a target repurchase amount of 500 to 1 billion yuan. 2) The company implemented and purchased the fifth phase of the employee stock ownership plan in 2023, with a cumulative transaction amount of 675 million yuan. At the same time, the company also has the sixth phase of the employee stock ownership plan in progress, and the total amount of capital to be raised is no more than 800 million yuan. Continued share repurchase and employee stock ownership plans demonstrate the company's confidence in future development.

Profit forecast and investment rating: We maintain the company's 2024-2026 net profit forecast of 11/17/1.9 billion yuan. Based on the closing price on April 29, the corresponding PE was 24.0/16.0/14.2 times, respectively, and maintained a “buy” rating.

Risk warning: raw material prices fluctuate, garment demand falls short of expectations, overseas refined oil market declines