Description of the event
The company released its 2023 annual report, achieving revenue of 82.64 billion yuan (+33.3% year over year), realized net profit of 80 million yuan (+539.1% year over year), and realized non-net profit of 450 million yuan (+5208.3% year over year). Among them, Q4 achieved revenue of 20.09 billion yuan in a single quarter (+41.2% YoY, -15.9% YoY), realized net profit of 110 million yuan (YoY loss reduction, -113.3% YoY), and realized attributable deducted non-net profit of 270 million yuan (year-on-year loss, -138.0% month-on-month).
Incident comments
Production capacity increased significantly in 2023, and the volume and price of filament increased sharply. In 2023, the company's polyester filament and PTA production capacity reached 1,350 and 10.2 million tons/year, respectively. Domestic demand for clothing recovered significantly compared to 2022. The company's filament production and sales volume were 10.43 and 10.31 million tons respectively, +34.2% and +35.0%, respectively. In terms of profit, benefiting from the recovery in downstream textile and garment demand, the efficiency of polyester filament increased significantly; according to China Fiber Network, the price differences of POY, FDY, and DTY in East China in 2023 were 1099, 1649, and 2305 yuan/ton, respectively, up 38, 118, and 2 yuan/ton, respectively, and corporate inventories remained healthy in 2023. There were few loss promotions/stepped on shipments, and the benefits were significantly better than in 2022.
The 2023Q4 economy declined slightly due to the off-season. After the traditional peak season of “gold, nine, silver, and ten”, polyester filament experienced a seasonal decline; according to China Fiber Network, the price differences for 2023Q4 East China POY, FDY, and DTY were 1,020, 1587, and 2,218 yuan/ton, respectively, down 66, 44, and 196 yuan/ton from 2023Q3, respectively, and the company's performance declined month-on-month.
I am optimistic about the optimization of the supply and demand pattern of polyester filament, and the boom will improve. Demand side: The apparent consumption of polyester filament in China increased from 21.17 million tons in 2014 to 43.05 million tons in 2023, with a compound growth rate of 8.2%; as the largest category of chemical fiber, polyester has excellent properties such as high elasticity, wear resistance, heat resistance, etc., and its price has obvious advantages over traditional natural fibers such as cotton, etc., and applications such as cotton and wool continue to expand, and the proportion is increasing year by year; overseas clothing stocks have experienced a long process of elimination, which is expected to usher in an improvement in upstream fabric demand. Supply side: The industry boom has bottomed out in the past 2 years, and production capacity of nearly 3 million tons/year has been cleared.
According to our statistics, the net new production capacity of the polyester filament industry in 2024 was only about 410,000 tons, accounting for about 0.8% of the total domestic polyester filament production capacity, and the supply increase was extremely limited; in 2025, the polyester filament industry had some additional production capacity, but the production capacity of various companies expanded in an orderly manner. The tight supply and demand pattern is expected to continue, at least there is no significant excess; in the medium to long term, leading capital expenditure will shift to overseas refining and refining, and domestic polyester filament production expansion is expected to continue at a slower pace. We are optimistic that the supply and demand of polyester filament will improve, and the industry will usher in an upward cycle.
The layout is overseas refining and chemical, and the growth rate is excellent. In June 2023, the company announced that it intends to launch Taikun Petrochemical's integrated refining and chemical project in Indonesia, with a total investment of 8.6 billion US dollars, a scale of 16 million tons/year of refining oil, 5.2 million tons/year of xylene (PX) production capacity and 800,000 tons/year of ethylene. The company indirectly holds 45.9% of the shares of Taikun Petrochemical, the project entity. The overseas layout has broad prospects for refining and chemical development, opening up space for the company's long-term development.
Maintain a “buy” rating. The company is the leading domestic polyester filament. It has ranked first in production and sales for many years. It is expected to benefit from the upward trend of polyester filament, huge flexibility, overseas refining and chemical layout, and broad room for growth. The net profit attributable to the company in 2024-2026 is 35.9 billion yuan, 48.3 billion yuan, and 6.20 billion yuan, respectively, maintaining a “buy” rating.
Risk warning
1. Demand for clothing falls short of expectations;
2. Crude oil prices fluctuate greatly.