1H24 results are in line with market expectations
The company's 1H24 revenue was 97.067 billion yuan, up 10.77% year on year; net profit to mother was 8.174 billion yuan, down 4.6% year on year, in line with market expectations. The company announced an interim dividend of $0.52 per share (tax included). The net profit of 1H24 BC was 0.103 billion yuan (a year-on-year decrease of 0.61 billion yuan), mainly due to the suspension of production due to force majeure and poor demand in Europe, which had a certain impact on the company's overall performance. Due to increased MDI and TDI sales, Fujian Wanhua's net profit increased 40% year over year to 0.839 billion yuan. By sector, 1H24 polyurethane revenue increased 8.2% year over year to 35.5 billion yuan, sales volume increased 14.5% year on year, gross margin decreased 1.12ppt to 28% year on year; petrochemical business revenue increased 9.5% year on year to 39.6 billion yuan, gross margin increased 2.21ppt to 4.52% year on year; fine chemicals and new materials revenue increased 15.2% year on year to 13 billion yuan, sales volume also increased 24.3% year on year, and gross margin decreased 5.06 ppt to 16.99% year on year, mainly This is due to falling prices of products such as the ADI series and product restructuring.
2Q24 revenue was 50.91 billion yuan, up 11.4%/10.3% YoY; net profit to mother was 4.017 billion yuan, down 11%/3.4% YoY. The average price of 2Q24's polyurethane series fell 2.6% month-on-month, while prices of raw materials such as pure benzene/toluene rose, and 2Q24's overall gross margin fell 2.2ppt to 14.8% month-on-month. 2Q24 gross profit increased by 0.8 billion yuan year on year, but expenses and income tax increased by 0.742/0.379 billion yuan year on year, respectively, resulting in a year-on-year decline in net profit.
Development trends
MDI and TDI earnings are strongly supported, and earnings are expected to continue to improve in the near future. As supply-side maintenance and peak downstream demand season gradually approaches, we expect MDI and TDI earnings to improve. Currently, the company's polyurethane profit mainly comes from its cost advantage, and the profit is in the bottom range with strong stability. As the company's MDI/TDI production and sales volume continues to rise, we believe the bottom profit of polyurethane may continue to expand.
The gradual commissioning of new projects has led to an increase in the company's profit center. The company's MDI and TDI production capacity will continue to expand as the company continues to improve its MDI technology and expand production capacity and builds new TDI production capacity in Fujian. In terms of petrochemical projects, we expect that the company's ethylene phase II project (naphtha plus ethane is used as raw material) and the Penglai PDH project will be gradually put into operation in 4Q24. At the same time, the raw materials for the first phase of the ethylene project will be replaced with low-cost ethane, etc., and we expect that the profit of the petrochemical project may change positively. In terms of fine chemicals and new materials, 0.2 million tons of PoE have already been put into operation. We expect the citral industry chain to be put into operation soon, as well as the construction of many other new materials and fine chemical projects, which will drive the company's new materials and fine chemicals profits to increase.
Profit forecasting and valuation
Due to high energy prices and demand growth pressure, we lowered our 2024/25 profit forecast by 15%/12% to 17.6/23 billion yuan. Currently, the company's stock price corresponds to the 2024/25 price-earnings ratio of 13.4/10.2x. Considering that the current profit is at the bottom of the cycle and that the company has many incremental projects in the second half of the year, we maintained a target price of 105 yuan, corresponding to a 40% increase space and a price-earnings ratio of 18.7/14.3x in 2024/25, to maintain an outperforming industry rating.
risks
New projects are progressing less than expected, bulk energy prices have risen sharply, and MDI and TDI prices have fallen short of expectations.