Event: The company publishes its report for the first quarter of 2024. With 2024Q1, the company achieved revenue of 36.7 billion yuan in a single quarter, +24% year over year and -0.2% month on month; realized net profit of 247 million yuan, -66.5% year on year (after adjustment) and +2 billion yuan month on month.
Comment:
Accrued impairment affected profits in the short term, and 24Q1 performance was under pressure: as downstream demand continued to pick up, the 24Q1 aromatic hydrocarbon industry chain maintained a high boom, and price spreads remained high. In Q1 2024, naphtha cracking, refining, PX, PTA, and DTY were -64.3 dollars/ton, 806 yuan/ton, 1,179 yuan/ton, 396 yuan/ton, and 2,224 yuan/ton, +25 yuan/ton, +204 yuan/ton, +814 yuan/ton, +16 yuan/ton, -68 yuan/ton, -349 yuan/ton, -349 yuan/ton, -7 yuan/ton, and -86 yuan/ton, respectively. With the gradual recovery of China's economic operation, the prosperity of the refining and chemical industry is showing an upward trend, and they are optimistic about the recovery of profits from refining and chemical. In 24Q1, the company calculated asset impairment provisions of 515 million yuan, of which 504 million yuan was prepared for inventory price reductions, putting pressure on the company's profits in the short term.
The refining and chemical project was fully put into operation, and the company's core competitiveness continued to increase: in the refining and chemical sector, 2023 was the first year the production capacity of the company's integrated refining and chemical project was fully released. The project designed a crude oil processing capacity of 16 million tons/year, with an aromatic hydrocarbon combined plant scale of 2.8 million tons/year, and an ethylene cracking plant scale of 1.1 million tons/year. The company achieved a full industry chain layout “from a drop of oil to a wire”. In the polyester chemical fiber sector, by the end of '23, the company had an annual production capacity of 3.55 million tons of polyester filament, with a differentiation rate of over 90%, mainly high-end products DTY. The company has a high collaborative development advantage. The refining, polyester and new energy materials sectors are fully linked to jointly develop high-performance, high-value-added materials and their modified applications, providing broad possibilities for further downstream collaborative extension of the industrial chain.
Actively promote the construction of new materials projects and deepen the “1+N” industrial chain layout: As a core raw material supply platform, the company's integrated refining and chemical project will be fully put into operation in 2023 to promote breakthrough progress in many new energy new material products. 1) In 2023, the fourth acrylonitrile plant of Sierbon Petrochemical was put into operation, and the total production capacity rose to 1.04 million tons/year, ranking first in the world. 2) As of 24Q1, the company has independent POE research and development capabilities, and the 800 tons/year POE pilot plant has been successfully put into operation. In the future, the company plans to have a total EVA production capacity of more than 1 million tons and a total POE production capacity of 500,000 tons, making every effort to build a world-class production base for photovoltaic film materials. 3) High-end new material projects such as 250,000 tons/year recycled polyester fiber, 130,000 tons/year PETG, and 90,000 tons/year MMA have been put into operation one after another. The main raw materials have achieved basic self-supply, and the advantages of upstream and downstream integration are remarkable. Projects under construction are progressing steadily to ensure the company's future growth.
Profit forecast, valuation and rating: Considering that the recovery progress of the refining and chemical industry fell short of our previous expectations, we lowered the company's profit forecast for 2024-2025 and added a profit forecast for 2026. We expect the company's net profit to mother for 2024-2026 to be 37.59 (49% reduction)/50.83 (45% reduction)/6.303 billion yuan, respectively, corresponding EPS of 0.57/0.77/0.95 yuan. The company's refining and chemical project is fully put into operation, the new materials project is progressing steadily, and there is broad room for growth, so the company's “buy” rating is maintained.
Risk warning: The progress of new production capacity investment falls short of expectations, global economic recovery falls short of expectations, and international crude oil prices fluctuate.