The company released its 2024 mid-year report. Revenue for the first half of 2024 was 31.272 billion yuan, up 10.96% year on year; net profit to mother was 0.605 billion yuan, up 26.17% year on year; net profit after deducting non-return to mother was 0.539 billion yuan, up 46.33% year on year. Among them, Q2 revenue was 16.82 billion yuan, up 7.32% year on year; net profit to mother was 0.329 billion yuan, up 13.70% year on year; net profit after deducting non-return to mother was 0.309 billion yuan, up 21.15% year on year.

The supply and demand for polyester filament continued to improve, and the sharp rise in volume and price drove performance growth. As domestic steady growth policies continue to gain strength, downstream demand in the polyester filament industry has improved markedly, and sales and prices of the company's main products have increased. According to the company announcement, Q2's sales volume of POY, FDY, DTY, short fiber and PTA in 2024 was 124.49, 37.22, 0.1924, 0.3352, 0.1158 million tons, with year-on-year changes of -1.17%, +1.81%, -2.83%, +14.21%, and +16.38%, respectively. The month-on-month changes were +15.07%, +13.78%, +16.59%, and +4.61%, respectively. Furthermore, in the first half of 2024, the average sales prices of POY, FDY, DTY, short fiber, and PTA were 6,885.30, 7,793.80, 8,772.99, 6,554.31, and 5,211.51 yuan/ton, respectively, up +1.99%, +3.01%, +4.8%, +1.88%, and +2.13%, respectively. As downstream demand recovers and the pace of expansion slows significantly in the next two years, we believe that the polyester filament industry is expected to recover, driving the company's performance to continue to pick up.

Horizontal and vertical integrated development to improve the industrial chain. At present, the company has formed an integrated and large-scale operation pattern of “PTA - polyester - spinning - elastic”, and has become one of the leading enterprises in the national chemical fiber industry. The company's annual production capacity of polyester filament has reached 7.4 million tons, and the production capacity of staple fiber has reached 1.2 million tons.

In terms of vertical development, the company continued to plan 5.4 million tons of PTA production capacity based on Dushan Energy's 5 million tons of PTA production capacity. The project uses KTS's PTA P8++ technology, which has significant technical advantages in terms of cost, energy consumption and product performance. The company's PTA unit consumption advantage ranks among the highest in the industry. The company's PTA production capacity is expected to reach 10 million tons by the end of 2025.

Maintain profit forecasts and maintain a “buy” rating. Xinfengming is a major polyester filament enterprise. With the reduction in new production capacity investment in the industry this year and next two years, and the supply and demand pattern optimization, the polyester filament boom is expected to recover, driving the company's performance growth. We expect the company's revenue in 2024-2026 to be 66.05, 70.83, 75.54 billion yuan, and net profit to mother of 1.89, 2.59, and 2.95 billion yuan. The corresponding PE is 9X/6X/6X, maintaining the “buy” rating.

Risk warning: downstream demand falls short of expectations, production capacity investment falls short of expectations, rising raw material costs, profit forecasts and valuation models fall short of expectations