occurrences

Xinfengming released its 2024 semi-annual report on August 28, 2024. 2024H1 achieved operating income of 31.272 billion yuan, an increase of 10.96% over the previous year, and realized net profit of 0.605 billion yuan to mother, an increase of 26.17% over the previous year.

Among them, 2024Q2 achieved operating income of 16.82 billion yuan, up 7.32% year on year and 16.38% month on month, and 2024Q2 realized net profit of 0.329 billion yuan, up 13.70% year on year and 19.73% month on month.

The production and sales situation in the industry is relatively good, and it is expected that the boom will pick up

The operating rate of polyester filament remains at a high level. The average operating rate of 2024Q2 reached 88.45%, +8.74pct year over year, and +6.54pct month-on-month. The average inventory value of 2024Q2 polyester filament was 2.83 million tons, a year-on-year decrease of 43.78%, and remained within the healthy range. The production and sales situation in the industry is relatively good, and it is expected that the boom will pick up.

Further improvement in consumer demand for polyester filament may enhance the company's profitability. Demand for polyester filament consumption rebounded steadily from January to July 2024. The cumulative apparent consumption of polyester filament reached 19.52 million tons in January-July, an increase of 27.06% over the previous year. The average operating rate of the 2024Q2 downstream polyester filament loom was 70.14%, up 12.06% year on year and 16.07% month on month. If consumer demand for polyester filament improves further, it is expected that the price difference will widen, and the company's profitability may increase.

Polyester filament spigot is expected to gain performance elasticity

The average price difference of 2024Q2 polyester filament POY/DTY/FDY-PTA&MEG was 996 yuan/2,246 yuan/1,431 yuan/ton, respectively, up 2.33%/2.81%/6.79% year-on-year, respectively, and decreased by 2.18%/4.43%/7.95% month-on-month, respectively. The company currently has a production capacity of 7.4 million tons/year of polyester filament. If terminal demand increases steadily, the company is expected to gain elastic performance.

Profit Forecasts, Valuations, and Ratings

We believe that the company is expected to gain performance flexibility in the face of a steady rise in terminal demand. We expect the company's net profit to be 1.6 billion yuan/3 billion/ 4 billion yuan in 2024-2026, corresponding EPS of 1.07 yuan/1.99 yuan/2.65 yuan, and the corresponding PE is 10.0X/5.4X/4.0X, giving it a “buy” rating.

Risk warning: (1) risk of failure to pass approval or excessive approval time; (2) risk of large fluctuations in oil prices; (3) risk of terminal demand recovery falling short of expectations; (4) geopolitical risk; (5) polyester project construction progress falling short of expectations; (6) risk of large fluctuations in the US dollar exchange rate; (7) force majeure effects.