Matters:
The company released its 2024 mid-year report. 24Q2 achieved revenue of 50.906 billion yuan, +11.42%/+10.28% year over month; realized net profit attributable to mother 4.017 billion yuan, -11.03%/-3.38% year over month, respectively; realized net profit deducted from mother of 3.972 billion yuan, -8.09%/-3.76% year-on-month respectively. The company plans to distribute an interim cash dividend of RMB 0.52 (tax included) per share, totaling a total profit of approximately RMB 1.633 billion.
By sector, 24Q2 achieved revenue of 18/21.1/6.9 billion yuan from polyurethane, petrochemicals, fine chemicals and new materials business, +3%/+14%/+13%; achieved sales volume of 1.38/1.41/0.48 million tons, +5%/+9% month-on-month; achieved an average sales price of 13010/14937/14320 yuan/ton, respectively.
Commentary:
The three major sectors continued to increase their contributions, and the boom in the new materials sector recovered. Thanks to technical improvements and capacity expansion of the MDI plant at the Fujian base, the increase in the effective production capacity of the TDI device, and the commissioning of the new polyether plant in Yantai, the three major sectors of 24Q2 Company continued to increase their contributions. Judging from the level of product price differences, due to the rise in crude oil prices, the price of pure benzene of 24Q2 raw materials reached 8962 yuan/ton, up 10% from month to month; the average price difference of polymeric MDI/pure MDI/TDI/soft foam polyether for 24Q2 polyurethane related products was about 6924/8759/7730/995 yuan/ton, respectively, +1%/-21%/-14% month-on-month, respectively. The 24Q2 petrochemical sector was affected by rising raw material prices compounded by weak downstream demand recovery, and product price spreads were still under relative pressure. Among them, ethylene/PDH price differences were -19%/-6% month-on-month, respectively. Product prices in the 24Q2 fine chemicals and new materials sector showed a good recovery trend. Major new material products achieved a sharp rise in volume and price. Among them, the average price of TPU/PMMA/PC/HDI was +1%/+14%/+3%/-14%, respectively. The 24Q2 company achieved gross margin/net margin of 15.31%/8.66%, respectively, and -2.3/-1.2pct month-on-month respectively. The cost ratio for the period was -0.3 pct to 5.4% month-on-month, mainly due to a decrease in sales expenses.
Looking at the operations of major subsidiaries, 24H0.01 million China's Ningbo, Wanhua Fujian, and Hungary's Powerside achieved net profit of 1.745, 0.839, and 1.03 billion yuan respectively, of -19%/+40%/-86% year-on-year respectively.
Global polyurethane demand is recovering steadily, and the industry sentiment is expected to continue to improve. Since 2024, overseas MDI demand has remained high, and overseas production capacity failures and force majeure incidents on the supply side are frequent. Many MDI installations around the world have also maintained a low production state, and the scarcity of stable domestic MDI supply continues to be prominent. According to Baichuan, China exported 0.644 million tons of polymeric MDI in 24H1, up 6% year on year; of these, Shandong+Zhejiang+Fujian regions exported a total of 0.549 million tons, +14% over the same period last year. In the first half of '24, the company's MDI plant in Fujian Industrial Park completed technical transformation and capacity expansion. The total MDI production capacity increased to 3.5 million tons/year, and the global market share and overall competitiveness are expected to continue to increase. Since July '24, the MDI price spread has been significantly repaired. Among them, the average price spreads of aggregate MDI and pure MDI were +18% and +7% compared to the second quarter, respectively, and the polyurethane sector boom is expected to continue to improve.
Cooperation between China and foreign countries has raised the level of internationalization, and the gradual implementation of projects under construction provides long-term growth momentum. The company signed a project cooperation agreement with Abu Dhabi National Petroleum Company, Nordic Chemical and Borouge Chemical in July 2024. Later, they plan to establish a Sino-foreign joint venture and jointly launch a feasibility study for a 1.6 million tons/year integrated special polyolefin facility in Fujian. The company is expected to use the advantages of joint venture partners in ethane cracking processes and production of specialty polyolefin products to accelerate the improvement of the company's internationalization level and global competitiveness. Looking ahead to the second half of the year, some of the company's production capacity and incremental projects are expected to gradually be implemented. Following the successful commissioning of the 0.2 million tons/year PoE project, the 0.048 million tons/year citral fragrance project/Penglai phase I 0.9 million tons/year PDH project/Yantai 1.2 million tons/year large ethylene phase II project are expected to be put into operation one after another by the end of 24q3/24q4/24, respectively. The company has sufficient momentum for long-term growth.
Investment advice: We maintain the company's 24-26 net profit forecasts of 19.168, 21.305, and 23.258 billion yuan, respectively. The corresponding EPS is 6.11, 6.79, and 7.41 yuan, respectively. The current market value corresponds to the 24-26 PE of 14x, 13x, and 12x, respectively. Considering that the company, as an industry leader, is expected to take the lead in benefiting from the recovery in industry demand and profit improvement, and that high-value-added products are expected to gradually land and open up room for future growth, we will give the company 15 times PE in 2025, corresponding to a target price of 101.85 yuan for 25 years, maintaining a “strong push” rating.
Risk warning: Energy prices have changed drastically, downstream demand falls short of expectations, the commissioning progress of new projects falls short of expectations, and the risk of environmental policy changes.