In 2023, the company achieved operating income of 140.404 billion yuan, an increase of 119.87% year on year; net profit to mother was 717 million yuan, an increase of 17.35% year on year. The first quarter of 2024 achieved revenue of 36.739 billion yuan, up 24.34% year on year and down 0.16% month on month; net profit to mother was 247 million yuan, down 66.53% year on year, up 114.01% month on month.
As industry sentiment recovers, the company's operating performance is expected to improve and maintain its buying rating.
Key points to support ratings
Integrated refining and chemical production capacity was released, and asset depreciation dragged down performance. The production capacity of Shenghong's integrated refining and chemical project was fully released, driving the company's revenue scale to increase dramatically. The production and sales volume of new petrochemical and chemical materials in 2023 was 156.983 million tons/19.1671 million tons respectively, up 194.66%/165.76% year on year, achieving revenue of 114.625 billion yuan, up 172.55% year on year, gross profit margin of 12.40%, up 4.20 pct year on year. Among them, refining product revenue was 29.033 billion yuan, up 1597.75% year on year, gross margin was 27.04%, up 11.89pct year on year. Other petrochemical and new chemical materials achieved revenue of 85.592 billion yuan, up 112.14% year on year, gross margin was 7.44%, down 0.47 pct year on year. In terms of expenses, sales expenses, management expenses, financial expenses, and R&D expenses were 3.34/8.64/34.94/671 million yuan, respectively, up 74.75%/27.84%/75.73%/33.46% year-on-year, respectively. Furthermore, due to accrued inventory impairment, asset impairment reached $2,210 billion in 2023, an increase of 120.87% over the previous year. Asset depreciation in the first quarter of 2024 was 504 million yuan, an increase of 84.78% year on year, causing a certain drag on profit levels. The company has completed the construction of a comprehensive chemical raw material supply platform integrating refining and chemical integration, alcohol-based multi-production, and PDH. In the future, as price fluctuations of external raw materials weaken and internal management efficiency improve, the advantages of the company's “Big Chemical” platform may gradually become prominent.
Product prices stabilized in 2024 Q1, and gross sales margins rebounded. According to Baichuan Yingfu statistics, the average price of 2024Q1 Brent crude oil was 83.29 US dollars/barrel, down 1.33%; the average price of the PX/PTA market was 8406.68 /5867.25 yuan/ton, up 0.84% from month to month; the average price in the polyethylene/polypropylene market was 8173.3/7405.37 yuan/ton, +1.22%/-3.16% month-on-month; the average price in the gasoline/diesel market was 8949.62/7651.70 yuan/ton, -0.27%/-3.65%. 2024Q1's gross sales margin was 10.89%, up 4.25 pct from month to month. In the future, as the prosperity of the petrochemical industry recovers, the company's profitability is expected to continue to increase.
New material projects are progressing in an orderly manner, deepening the “1+N” industrial layout. The company Silbon Petrochemical put into operation the fourth acrylonitrile plant, and the total production capacity rose to 1.04 million tons/year, ranking first in the world. Self-developed POE pilot testing was successful, the 100,000 tons/year industrialization plant construction work was successfully implemented, and 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 were put into operation one after another. At the same time, the goal was to build the world's largest photovoltaic film production base, and the planned million-ton EVA project continued to gain strength. Focusing on new energy materials, high-performance new materials, and low-carbon green industries, the company comprehensively promotes the transformation of strategic emerging industries. It is committed to building and forming a new “1+N” pattern of core raw material platform+diversified industrial chains such as new energy, new materials, electronic chemistry, biotechnology, etc., and has broad room for development in the future.
valuations
Considering that crude oil prices are still high on the cost side, and that downstream demand in the petrochemical industry chain is slowly rising and profit forecasts are lowered, the company's net profit to mother for 2024-2026 is estimated to be 2,952 billion yuan, 4.810 billion yuan, and 6.136 billion yuan, respectively. The company's earnings per share for 2023-2025 are expected to be 0.45 yuan, 0.73 yuan, and 0.93 yuan, respectively, and the corresponding PE is 22.4 times, 13.7 times, and 10.8 times, respectively. High-quality assets based on refining and chemical are scarce. At the same time, as the industry's prosperity recovers in the future, the company's operating performance is expected to improve, maintaining the company's rating as a purchase.
The main risks faced by ratings
Crude oil prices fluctuate sharply; the economy declined sharply; production was limited or demand fell short of expectations due to policy risks, etc.