The equity structure of Indonesia's North Canada Refining and Chemical Integration Project is to be adjusted
Taikun Petrochemical (Indonesia) Co., Ltd., as the main body of the Indonesian refining and chemical integration project, plans to adjust the shareholding structure: previously, the company ultimately held 45.9% of Taikun Petrochemical's shares, Xinfengming held 44.1%, and Shanghai Qingyi held 10%. The proposed adjusted shareholding structure of Taikun Petrochemical: The company holds 80% of the total shares, Xinfengming holds 15% of the shares through Rocco Spark, and 5% of Shanghai Qingyi's shares. The increase in the company's shareholding ratio and the increase in its annual equity refining and processing capacity will help the company strengthen its control over the Indonesian refining and chemical project, reduce investment risks and operational risks, benefit the company's long-term development and the interests of all shareholders, and facilitate the smooth progress of the project.
The amount of investment has declined, and the scale of the refinery has decreased
The total investment approved for the original project was US$862.37 million, adjusted to US$594.762 million; the scale of the refinery was reduced, the proportion of aromatic hydrocarbons increased, and the processing method of heavy components changed from residual oil hydrocracking+hydrocracking of diesel oil to hydrocracking of residual oil plus hydrocracking of wax oil; the scale of the project was changed from the original 16 million tons/year oil refining, para-xylene (PX) production capacity 5.2 million tons/year, and 800,000 tons/year of ethylene (PX); adjusted to 10 million tons/year for oil refining, para-xylene (PX) Production capacity 2 million tons/year, ethylene 1.2 million tons/year.
Target market adjustment, focusing more on mainland Indonesia
The target market for the original Taikun petrochemical products: 4.67 million tons/year of refined oil, sulfur, etc. are digested in the Indonesian domestic market; 8.47 million tons/year of paraxylene, acetic acid, benzene, propane, etc. are digested by the Chinese domestic market; 1.18 million tons/year of full-density polyethylene, FDPE, EVA, polypropylene, etc. are jointly digested by the Chinese, Indonesian and ASEAN markets;
Currently, the target market for Taikun petrochemical products: 5.58 million tons/year of refined oil, sulfur, benzene, liquefied gas, etc. are digested in the Indonesian domestic market; 2 million tons/year of xylene is transported back to the Chinese domestic market for digestion; 1.7 million tons/year of polyethylene FDPE, HDPE, LLDPE, polypropylene, etc. are jointly digested by the Indonesian and ASEAN markets.
In the target market of products, the share of Indonesia/China/Co-Digestion was adjusted from 33%/59%/8% to 60%/22%/18%. The products focus more on the local Indonesian market. We believe this move will help reduce logistics costs and enhance overall competitive advantage.
Profit forecast estimates: Both petrochemical and polyester filaments are at the bottom of the boom cycle and are expected to continue the recovery trend. We maintain the company's net profit forecast of 30/48/6 billion yuan for 2024/2025/2026, and PE corresponding to the stock price on May 24, 2024 is 13/8/6, respectively, maintaining a “buy” rating.
Risk warning: risk of project approval falling short of expectations; risk of market demand falling short of expectations; risk of process technology; risk of construction conditions; financial risk; business culture risk