Profit was 4.018 billion yuan, up 31.77% year over year. Among them, in the second quarter of 2024, it achieved total operating income of 54.184 billion yuan, a year-on-year increase of 1.65%, and net profit to mother of 1.878 billion yuan, a year-on-year decrease of 7.44%. The company's performance continued to improve, maintaining the purchase rating.

Key points to support ratings

Q2 Gross margin increased month-on-month, and sales of PTA and new material products increased. In the first half of the year, the company's gross sales margin was 11.85%, up 0.78 pct year on year, and the net sales margin was 3.58%, up 0.79 pct year on year. Among them, Q2 gross sales margin was 12.61%, -0.37 pct year on year, up 1.45 pct month on month. Sales of refining and chemical products, PTA, and polyester products in the first half of the year were 8.5503, 7.345, and 2.599 million tons, respectively. They achieved revenue of 45.997, 38.732, and 21.062 billion yuan, respectively, and -26.58%, +35.19%, and +40.61% year-on-year respectively, with gross margins of 16.58%, 4.82%, and 15.78%, respectively. In the future, as downstream demand improves, the company's profitability is expected to continue to increase.

The product structure is efficient and collaborative, and more measures are taken to reduce costs and increase efficiency. The company adheres to the business strategy of “quality, cost, quick response to maximize profits”, optimizes production and marketing collaboration, and flexibly adjusts raw materials, devices and product structures. In the second quarter of 2024, some refining and chemical plants completed technical optimization and upgrading. The consumption tax for the first half of the year was 2.638 billion yuan, a decrease of 29.23% over the previous year. Furthermore, the company has taken multiple measures to optimize procurement strategies and inventory management, expand diversified financing channels, and reduce financing costs. Fine management or promote the company to achieve high-quality endogenous growth in benefits.

Production capacity for new materials was gradually introduced, making it the second growth pole. The company's 1.6 million tons/year high-performance resin and new materials project is expected to be fully put into operation in the second half of 2024. The fine chemical project focuses on downstream extension of the carbon 2 industry chain and improvement of production capacity related to coal chemistry, mainly including bisphenol A, polycarbonates, electronic grade DMC, isopropyl alcohol, ethanolamine, polyformaldehyde, acetic acid, PTMEG and other products. In addition, the 12-line functional film project at the Suzhou Fenhu base has been put into operation one after another, and the other 12 functional film projects and lithium battery diaphragm projects at the Nantong base are progressing steadily. It is expected that they will all be completed and put into operation in the first half of 2025. High-value-added new material products will provide a new growth point for the company's development.

valuations

The company's performance continued to grow in the first half of the year, and the profit forecast is adjusted. The company's net profit for 2024-2026 is 9.238 billion yuan, 9.678 billion yuan, and 11.909 billion yuan, respectively. The company's earnings per share in 2024-2026 are expected to be 1.31 yuan, 1.37 yuan, and 1.69 yuan, respectively, and the corresponding PE is 10.1 times, 9.7 times, and 7.9 times, respectively. Maintain the company's buy rating.

The main risks faced by ratings

Crude oil prices fluctuated sharply; the economy declined sharply; production was limited due to policy risks; downstream demand fell short of expectations, etc.