Description of the event

The company released its report for the first quarter of 2024. In the first quarter of 2024, it achieved operating income of 36.739 billion yuan, an increase of 24.34%; net profit to mother was 247 million yuan, a year-on-year decrease of 66.53%; and net cash flow from operating activities was 981 million yuan, a year-on-year decrease of 60.15%.

Incident comments

Terminal demand continues to improve, and the 24Q1 polyester chain boom continues to recover. Polyester: By the end of December 2023, the company had a polyester filament production capacity of 3.55 million tons, with a differentiation rate of more than 90%, including a production capacity of 550,000 tons/year of recycled polyester fiber, which ranked among the highest in the global industry. At the same time, the company also has complete independent intellectual property rights, the world's leading bio-based PDO monomer, PTT fiber, and recycled polyester fiber industry chain. PTA: Honggang Petrochemical, a subsidiary of the company, has a PTA production capacity of 3.9 million tons/year and is an important supplier of polyester raw materials in East China. As terminal textile and garment stocks continue to be replenished, 2024Q1 polyester filament maintains a good boom, and polyester profits will remain stable; PTA's downstream polyester load remains at a high level, and there is support on the demand side, and PTA is expected to reduce losses.

Refining and chemical conversion to production, aromatic hydrocarbons and refined oil products maintained a high level of prosperity, and the company formed a “refining+polyester+new materials” industry matrix. Refining and chemical production capacity crude oil processing capacity is 16 million tons/year, with an aromatic hydrocarbon combined plant of 2.8 million tons/year and an ethylene cracking plant of 1.1 million tons/year. Domestic: Travel demand improved markedly, demand for refined oil products increased dramatically, and prosperity continued to rise; at the same time, the overseas refined oil market entered a seasonal peak season, and gasoline demand improved markedly, driving a significant increase in aromatic hydrocarbon profitability. The total proportion of refined oil products (4.96 million tons) and aromatic hydrocarbons (5.92 million tons) in the company's refined products reached 70%, significantly benefiting from the improvement in the popularity of aromatic hydrocarbons and refined oil products. The company's aromatic hydrocarbon industry chain uses domestic continuous reforming technology and the largest total domestic 3×3.1 million tons/year plant. In addition, the 3.2 million tons/year boiling bed residue hydrogenation unit, 3.2 million tons/year diesel hydrocracking unit, 2.8 million tons/year PX unit, and 4 x 150,000 tons/year sulfur recovery unit used in the project are all large-scale domestic plants. The scale of process equipment and the enlargement of equipment have led to a corresponding increase in equipment efficiency, which is conducive to energy recovery and comprehensive utilization, thereby further improving production efficiency and economic efficiency.

Deepen the layout, and there is plenty of room for growth. Refining and Chemical: Shenghong Refining and Chemical's new 2 #乙二醇 + phenol/acetone project was put into operation in March 2023; Hongwei Chemical built a new POSM and polyol project; new energy materials sector: planning to build new chemical materials projects such as EVA, planning 300,000 tons/year POE and 200,000 tons/year α-olefin industrialization devices; Degradable Plastics Project: Hongke New Materials Degradable Materials Project (Phase I) completed the first phase of the project by the end of June 2023; the first phase of the project was announced by the end of June 2023; Haggs New Energy supporting raw materials and iron phosphate, iron phosphate, etc. lithium The new energy materials project is still in the early stages of the project as of June 2023.

Lead the industry's green and intelligent development path. The company has always insisted on deepening the cultivation and exploration of green process technology in all aspects of low carbon, zero carbon dioxide and negative carbon dioxide. In September 2023, the first domestic 100,000 ton carbon dioxide green methanol plant built by the company in cooperation with the Icelandic Carbon Recycling Company was officially put into operation in Lianyungang, Jiangsu.

As one of the leading domestic refining and chemical integration companies, without considering future changes in share capital, the company's net profit from 2024 to 2026 is estimated to be 2.97 billion yuan, 4.57 billion yuan, and 5.31 billion yuan. Corresponding to the closing price of PE on April 29, 2024, the PE is 23.0X, 15.0X, and 12.9X respectively, 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.