Description of the event
The company released its 2024 quarterly report, achieving operating income of 21.11 billion yuan (+32.7% YoY, +1.0% month-on-month), realized net profit of 580 million yuan (year-on-year and month-on-month reversal of loss to profit), and realized non-net profit of 540 million yuan (year-on-year and month-on-month conversion).
Incident comments
2024Q1's production and sales increased significantly year-on-year, and the efficiency of polyester filament +PTA increased significantly. 2024Q1's net profit increased significantly, mainly due to an increase in the production and sales scale of filament, an improvement in PTA and filament price differences, and an increase in investment income.
In terms of scale: In 2023, the company's production capacity increased significantly. The production capacity of polyester filament and PTA increased by 3.9 million tons/year, respectively, and reached 13.5 million tons/year and 10.2 million tons/year respectively by the end of the year. 2024Q1's polyester filament production and sales volume reached 314.0 and 2.585 million tons respectively, +83.4% and +51.0% year-on-year respectively.
In terms of efficiency: 2024Q1 benefited from the almost one-sided rise in oil prices, and the price spread of polyester filament (considering the lag in raw materials) increased month-on-month. According to China Fiber Network, the POY-PX-MEG price difference in the first quarter of 2024 (considering a 14-day lag in raw materials) was about 1,319 yuan/ton, an increase of 107 yuan/ton over the previous month.
In terms of investment income: The company's investment income is mainly due to the contribution of 20% shares in Zhejiang Petrochemical's shares and the restoration of the 2024Q1 refining and chemical industry. The company obtained 250 million yuan in investment income in joint ventures and joint ventures, an increase of 760 million yuan over the previous year.
Inventory: Currently, the polyester filament factory side is facing some inventory pressure. According to China Fiber Network, as of April 26, polyester POY inventory reached 31 days, an increase of 16 days over the beginning of the year. The consolidated balance sheet inventory at the end of 2024Q1 reached 15.55 billion yuan, an increase of 5.30 billion yuan over the previous 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 in polyester filament, huge flexibility, overseas refining and chemical layout, and broad room for growth. The company's net profit for 2024-2026 is 35.1, 47.4, and 6.11 billion yuan respectively, maintaining a “buy” rating.
Risk warning
1. Demand for clothing falls short of expectations;
2. Crude oil prices fluctuate greatly.