Matters:
The company released its 2024 quarterly report. 2024Q1 achieved revenue of 14.452 billion yuan, a year-on-year increase of +15.53% /month-on-month; realized net profit of 275 million yuan, +45.25% /month-on-month +38.2% year-on-month, and net profit of 230 million yuan after deducting non-return net profit of 230 million yuan, or +102.96% month-on-month.
Commentary:
24Q1 filament prices improved month-on-month, and PTA turned a loss into a profit. Since the beginning of 2024, due to the year-on-year increase in export orders and a sharp increase in the operating rate of domestic downstream looms, the price of Q1 filament has increased month-on-month, and sales have declined month-on-month due to the shutdown of downstream production during the Spring Festival. The company's filament production capacity is a total of 7.4 million tons. According to operating data, the total sales volume of filament Q1 was 1.578,200 tons, +16.9%/18.1% month-on-month, with POY/FDY/DTY sales accounting for 69%/21%/11%, respectively. There was little overall structural change; in terms of unit price, the average price of Q1 POY was 0.69 million yuan/ton, +2.3% YoY, +2.3% YoY, +4.5% YoY The average DTY price was 0.87 10,000 yuan/ton, +4.7% YoY/+2.7% month-on-month. In terms of PTA, the company currently has a production capacity of 5 million tons, mainly for personal use. In 24Q1, the sales volume was 110,700 tons, and the average price was 0.52 million yuan/ton.
The growth rate of new production capacity in the industry declined significantly in 2024, and profits are expected to continue to improve after the supply and demand pattern improves. According to our statistics, the additional production capacity of the filament industry in '24 was 1.2 million tons (Tongkun 30+ Xinfengming 40+ Rongsheng 50), and production capacity was shut down to 930,000 tons. That is, the incremental filament production capacity in '24 was only 270,000 tons, and the supply-side growth rate dropped significantly to less than 1%. However, under the trend of consumption downgrading, demand for clothing and home textiles is improving. Demand growth rate reached +12.33% in 2023, and the supply-demand relationship was clearly repaired in 24. Furthermore, on the inventory side, inventory is expected to return to pre-inventory levels in '24. With a healthy recovery in supply and demand, the 24-year filament profit center is expected to open up an upward channel, and the company will enjoy greater flexibility.
The company's steady expansion of production continues to consolidate its position in the industry, and growth can be expected. The company's production capacity has increased at a clear pace in recent years, maintaining the pace of 1-2 sets of production expansion every year. Currently, the company's total filament production capacity is 7.4 million tons. It is expected to increase production capacity by 400,000 tons in 2024 and additional production capacity by 650,000 tons in 2025. In addition, the company is actively expanding its layout upstream. Currently, the company has 5 million tons of PTA production capacity and a long-term plan of 5.4 million tons. They all use the most advanced P8++ technology, which has a certain cost advantage over its peers. In order to further expand upstream, the company participated in the Taikun Petrochemical (Indonesia) refining and chemical project, which is expected to further enhance its cost advantage.
Investment advice: We expect the company's net profit to be 19.11/2434/2,951 billion yuan in 2024-2026, corresponding to EPS 1.25/1.60/1.94 yuan in 24-26, and PE corresponding to the current market value is 12x, 9x, and 8x, respectively.
Referring to the average valuation of comparable companies, PE was given 16.2 times in 2024, corresponding to a target price of 20.25 yuan. Considering the continued boom in the filament sector in 2024, it was raised to a “strong push” rating.
Risk warning: Capacity investment progress falls short of expectations, raw materials fluctuate greatly, and demand side recovery falls short of expectations