Incident: The company released its 2024 semi-annual performance report. In 2024 H1, the company achieved revenue of 16.895 billion yuan, +29% year over year; realized net profit of 3.304 billion yuan, +46% year over year; of these, Q2 achieved net profit of 1.883 billion yuan to mother in a single quarter, +76% year over year and +33% month over month.
Comment:
The commissioning of the third phase of Ningdong led to a sharp year-on-year increase in olefin sales, and the 24H1 performance showed a high year-on-year increase: 2024H1. The average market prices of the company's main products, coke, polyethylene, and polypropylene were 2,133 yuan/ton, 8,355 yuan/ton, and 7,778 yuan/ton, respectively. Coke prices fell sharply year on year, and polyolefin prices increased slightly year on year. The sharp year-on-year increase in the company's 24H1 performance mainly benefited from the commissioning of the Ningdong Phase III coal-to-olefin project in 23, and sales of olefin products increased sharply year over year.
Construction of the first phase of the Inner Mongolia project has begun, and the company's future growth space is expected: in 2023, the company's Ningdong Phase III coal-to-olefin and C2-C5 and mixed hydrocarbon value-added utilization projects were completed and put into operation. The project was the world's first olefin project utilizing the third-generation 1 million tons/year of the Dalian Chemical Institute of the Chinese Academy of Sciences, adding 1.5 million tons/year of methanol production capacity, 1 million tons/year, and adding 0.9 million tons/year of polyethylene and polypropylene production capacity. After the project is put into operation, the company's production capacity for polyethylene and polypropylene products is expected to increase by 75%. The first phase of Inner Mongolia's 2.6 million tons/year coal-to-olefin project and supporting 0.4 million tons/year green-hydrogen coupled olefins began construction in 2023. The construction process was over half of that year. The construction of the company's various projects is progressing in an orderly manner according to the plan, and there is plenty of room for future growth.
The increase in majority shareholders' holdings shows confidence in development and promotes employee shareholding to ensure future development: Baofeng Group, the controlling shareholder of the company, plans to increase its shareholding by 0.1-0.2 billion yuan within 6 months from February 1, 2024. The majority shareholder increase plan reflects confidence in the company's future development prospects and recognition of the company's intrinsic value. As of July 22, 2024, Baofeng Group's cumulative holdings increased by about 0.1 billion yuan. On March 14, 2024, the company issued the “2023 Employee Stock Ownership Plan Management Measures”. The holders of the employee stock ownership plan include company directors (excluding independent directors), senior management, core business (technical) backbone, and other personnel that the board of directors believes need incentives. The price of purchasing the company's shares is 7.60 yuan/share, which will be unlocked in four installments after 2 years. The performance assessment targets correspond to the year-on-year growth rate of the company's operating income in 2025-2028 of no less than 20%, 8.33%, and 7.69%. , 7.14%. The implementation of this employee stock ownership plan is expected to have a positive impact on the company's ability to continue operating and shareholders' rights and ensure the company's future development.
Continuous dividends and emphasis on shareholder returns: Since the company went public, all profit distributions have taken the form of cash dividends. Over the past five years, the company distributed a total of about 10.6 billion yuan in cash dividends, accounting for about 40% of net profit attributable to shareholders of the parent company during the same period. Of this, cash dividends were about 10.3 billion yuan, and stock repurchase funds used for equity incentives were 0.3 billion yuan. The dividend ratio was among the highest in the industry. While taking into account the long-term development of the company, shareholders can actually obtain the company's development results. In 2023, the company plans to distribute a cash dividend of 0.3158 yuan per share to small and medium shareholders, and a cash dividend of 0.2650 yuan per share for the majority shareholders. In total, it is proposed to distribute a cash dividend of RMB 2.054 billion, with a dividend ratio of 36.34%. In the future, on the premise of ensuring normal operation, the company will continue to provide investors with continuous and stable cash dividends to guarantee shareholder returns.
Profit forecast, valuation and rating: The company is a leading domestic coal-to-olefin enterprise. It continues to focus on industrial collaboration, cost reduction and efficiency, and has broad room for future growth. We maintain the company's profit forecast for 2024-2026. The company's net profit due to mother for 2024-2026 is 8.829/13.877/14.974 billion yuan, which is equivalent to EPS of 1.20/1.89/2.04 yuan, respectively. Maintain the company's “gain” rating.
Risk warning: risk of product price fluctuations; risk of rising raw material prices; project commissioning progress falls short of expectations.