Incidents:
The company released its 2024 semi-annual report. 2024H1 achieved revenue of 16.897 billion yuan, yoy +29.09%; realized net profit to mother of 3.305 billion yuan, yoy +46.44%, which is basically in line with the performance report. In a single quarter, the company achieved revenue of 8.67 billion yuan, yoy +36.39%, qoq +5.39%; realized net profit to mother of 1.884 billion yuan, yoy +75.80%, and qoq +32.57%.
Conclusions and comments:
New production capacity was released, polyolefin prices picked up, and a sharp rise in volume and price led to revenue growth; lower raw material prices led to an increase in profits. The company's Inner Mongolia project was put into operation during the year, and production capacity is expected to double, expand at the bottom of the cycle, further strengthen cost and scale advantages, look forward to the company's long-term growth, and maintain a “buy” rating.
Rapid release of production capacity led to sales growth: The company's revenue and performance increased month-on-month in the first half of 2024, mainly driven by the release of new production capacity and the increase in price differences of main products. In September '23, the company's Ningdong Phase III coal-to-olefin project was put into operation, adding 0.9 million tons/year of polyethylene and polypropylene production capacity. The release of production capacity drove a significant year-on-year increase in polyolefin sales; the supporting 0.25 million tons of EVA production capacity was released in February '24, further increasing the added value of the company's olefin products. In '24, H1's polyethylene sales increased 68.4% year on year to 0.575 million tons, achieving revenue of 4.087 billion yuan, yoy +69.2%; polypropylene sales increased 79.2% year over year to 0.572 million tons, achieving revenue of 3.815 billion yuan, yoy +75.5%; EVA products achieved revenue of 0.631 billion yuan. Subsequent Inner Mongolia's first phase of the 2.6 million tons/year coal-to-olefin project and supporting 0.4 million tons/year green-hydrogen coupled olefin project is expected to be put into operation within the year. The first power unit of the project was successfully launched on January 1 #锅炉7, completing the first major milestone in the test run of the Inner Mongolia project. The first unit will be put into trial production in October as planned. The company is in a period of intensive production capacity release. After the Inner Mongolia project is put into operation, the company's polyolefin production capacity will increase from 2.2 million tons to 5.2 million tons, doubling the growth rate. The introduction of new production capacity will further reduce the company's costs and energy consumption, and deepen the cost moat.
Polyolefin prices have picked up slightly, and I am optimistic that the “gold nine silver ten” peak season will arrive: Looking at the Q2 single season, the price of the company's main product polyolefin increased slightly, compounded by a drop in the price of coal as a superimposed raw material, and the company's gross margin increased. Q2 The company's gross margin increased by 10.39pct year-on-year to 38.23%. According to the company's operating data, the average price of Q2 polyethylene is 7302 yuan/ton, yoy +3.8%, qoq +5.5%; the average price of polypropylene is 6795 yuan/ton, yoy +2.1%, qoq +4.2%. The average price of coke Q2 was 1,386 yuan/ton, yoy +0.9%, and QoQ -9.6%. Since Q3, the prices of the company's main products, polyolefin and coke, have remained stable month-on-month, and we are still optimistic about the “Golden Nine Silver Ten” peak season ahead.
Raw material prices have declined, driving up gross profit margin: On the raw materials side, the coal price center has declined compared to last year. In addition, the company has also increased the share of cheap Xinjiang coal in external coal mining, further reducing costs. The average purchase price of 2024H1's main raw material, gasified feedstock coal, is 562 yuan/ton, YOY -15.5%. The average price of coking coal is 1,115 yuan/ton, yoy -12.9%, and the average price of thermal coal is 428 yuan/ton, yoy -18.3%. In 2024, the share of coal purchased by H1 from Xinjiang increased by nearly 7 percentage points compared to 2023. Currently, the crude oil/coal price ratio is still high, and the cost advantage of the company's coal-to-olefin is obvious.
Profit forecast: We maintain our profit forecast. We expect the company to achieve net profit of 7.9/13.3/14.8 billion yuan in 2024/2025/2026, YOY +39%/+68%/+12%, equivalent to EPS of 1.07/1.81/2.02 yuan. The current PE corresponding to the stock price of A shares is 14/8/8 times. The current valuation is reasonable. The company is in a period of intensive production capacity investment, optimistic about long-term development, and maintain a “buy” rating.
Risk warning: 1. The product price falls short of expectations; 2. The commissioning of new construction projects falls short of expectations, etc.