Description of the event
The company released its 2023 annual report. The cumulative revenue for the full year of 2023 was 26.918 billion yuan, down 9.70% year on year; net profit to mother - 384 million yuan, down 160.53% year on year; net cash flow from operating activities was 661 million yuan, down 54.73% year on year. Among them, revenue for the fourth quarter of 2023 was 6.684 billion yuan, up 2.33% year on year; net profit to mother was 573 million yuan, down 37.99% year on year. The company released its report for the first quarter of 2024. The cumulative revenue for the first quarter of 2024 was 5.480 billion yuan, down 10.79% year on year; net profit to mother was 32 million yuan, up 140.55% year on year; and net cash flow from operating activities was 355 million yuan, up 23.04% year on year.
Incident comments
C4 is the leader in the industrial chain and has significant advantages. The company has always focused on the deep processing of carbon 4, forming four product lines for comprehensive utilization of butylene, isobutene, butane and isobutane components. The main products include methylene ethyl ketone, maleic anhydride, methyl methacrylate (MMA) and nitrile latex, all of which rank among the leading in the industry. In terms of raw materials, Shandong, where the company is located, has the richest main refinery and ground refining resources in the country, providing the company with a rich supply of raw materials. The supply pattern of methyl ethyl ketone is stable, and the company's market share is high. Methyl ethyl ketone is an excellent organic solvent, and is also widely used in the coating industry. The main downstream are adhesives, coatings and PU pastes, which can be used in real estate, automobiles and clothing. In terms of domestic demand, domestic demand growth was significantly limited; in terms of external demand, the largest amount of methylene ketone was exported to South Korea. With the rise of new manufacturing industries in Southeast Asia and other countries, the export demand for methylene ketone will continue to grow steadily, and China accounts for nearly 50% of the world's methyl ethyl ketone production capacity.
The travel chain is booming, and MTBE and isooctane are relatively profitable. MTBE and industrial isooctane are currently mainstream gasoline raw materials in China. MTBE and industrial isooctane have all become indispensable components in gasoline due to their good characteristics of high octane number, low olefins, and low aromatic hydrocarbons. Driven by the high level of gasoline boom at home and abroad, MTBE and isooctane have maintained a high level of prosperity.
The MMA boom has increased significantly. The company's new materials business is mainly based on Qi Xiang Huali and the company's own 200,000 tons/year MMA project. The main products include MMA, isopropyl alcohol and other products. MMA is mainly used to produce plexiglass, high-end paint, high-end displays and other household appliances, decorative materials, etc. PMMA, the downstream product of MMA, is widely used in various fields such as lighting equipment, optical glass, instrumentation, optical fiber, aircraft cockpit glass, bulletproof glass, etc. In particular, with the rapid growth of the LCD market, the demand for optical-grade PMMA molding plastics has increased dramatically, with huge development potential and broad application prospects. The company will decide on the construction schedule of the PMMA project in due course according to market conditions.
Expansion of the C3 industrial chain opens up room for growth. The company invested in the construction of 700,000 tons/year of PDH, 300,000 tons/year of propane oxide, 80,000 tons/year of acrylic acid and 60,000 tons/year butyl acrylate, forming a relatively complete C3 industrial chain layout for propane-propylene-propylene oxide. Later, the company will vigorously build economies of scale and make up for the shortcomings of the industrial chain within the Zibo base. The focus is on promoting the development of the alcohol, lipids, polyether and other industrial chains to achieve the smooth extension of the company's industrial layout from C4 to C3 industry chain stretch.
As a leading company in the C4 industry chain, the company's product scale is at the forefront of the industry, the cost advantage is remarkable, and the alpha advantage is extremely prominent in the industry. Assuming that the project progresses normally, the company's net profit from 2024 to 2026 is expected to be 580 million yuan, 1.11 billion yuan, and 1.28 billion yuan. The PE corresponding to the closing price on April 26, 2024 is 25.6 times, 13.4 times, and 11.6 times, maintaining a “buy” rating.
Risk warning
1. International oil prices fell sharply; 2. The growth rate of downstream demand fell short of expectations; 3. The progress of the project fell short of expectations.