On May 24, 2024, the company announced that it will adjust the equity structure, investment amount and project scale of Taikun Petrochemical's integrated refining and chemical project in Indonesia. More specifically:
(1) In terms of the shareholding structure, the company's shareholding ratio rose to 80%. Before the adjustment, the company held 51% of Huacan International's shares through Tongkun Hong Kong, Huacan International held 90% of Taikun Petrochemical's shares, and the company's penetrating shareholding ratio for project subjects was 45.9%. After the adjustment, the company held 100% of Huacan International's shares through Tongkun Hong Kong, and Huacan International held 70% of Taikun Petrochemical's shares. At the same time, Tongkun Hong Kong held 10% of Taikun Petrochemical's shares through its wholly-owned subsidiary Peng Hao Investment. In the end, the company's shareholding ratio in Taikun Petrochemical reached 80%. The shareholding ratios of Xinfengming and Shanghai Qingyi have dropped to 15% and 5%, respectively.
(2) In terms of investment amount, the amount of financing for the project before the adjustment, including VAT (total investment submitted for approval) was US$8.62 billion, of which US$2.61 billion was self-raised and US$6.01 billion was raised by banks. After adjustments, total funding declined to $59.5 billion, of which $1.79 billion was self-funded and $4.15 billion was raised by banks.
(3) In terms of project scale, including refining and aromatic hydrocarbon process equipment, ethylene and downstream equipment and related supporting facilities. The original project included 16 million tons of refining, 200,000 tons of PX, and 800,000 tons of ethylene, adjusted to 10 million tons of refining, 2 million tons of PX, and 1.2 million tons of ethylene. The scale of refining and PX declined, and the share of ethylene increased.
In addition, according to the adjustment of the investment amount and project scale, the process routes, product plans, and target markets involved have also been adjusted accordingly.
The project adjustment is conducive to strengthening the company's control over the Indonesian refining and chemical project and promoting the smooth progress of the project.
The company's current adjustments to the equity structure, investment amount, and construction scale of the Indonesian refining and chemical project are the result of agreement among investors based on the principles of prudent decision-making, risk control, and steady progress. This adjustment has reduced the total investment in the project, increased the company's shareholding ratio, and increased annual equity refining and processing capacity, which will help the company strengthen its control over the Indonesian refining and chemical project, reduce investment risks and operational risks, and benefit the company's long-term development and the interests of all shareholders.
Adjust the profit forecast to a “buy” rating. We expect the company's revenue in 2024-2026 to be 933.7, 983.3, and 104.83 billion yuan (previously 897.0 billion yuan, adding 104.83 billion yuan in 2026), net profit to mother of 30.2, 42.6, and 5.22 billion yuan (previously 29.6 billion yuan, 4.69 billion yuan, an increase of 5.22 billion yuan in 2026). The corresponding PE is 12X/9X/7X, adjusted to a “buy” rating.
Risk warning: downstream demand falls short of expectations, production capacity investment falls short of expectations, raw material costs