Incident: The company released its 2024 semi-annual report. In the first half of 2024, the company achieved operating income of 16.897 billion yuan, a year-on-year increase of 29.09%, and net profit to mother of 3.305 billion yuan, an increase of 46.44% over the previous year.
Maintain a “buy” rating.
Reduced costs have led to a significant increase in the profit level of coal-to-olefin, and performance continues to grow rapidly. In the first half of 2024, the company achieved operating income of 16.897 billion yuan, a year-on-year increase of 29.09%, and net profit to mother of 3.305 billion yuan, an increase of 46.44% over the previous year. Among them, the company's operating income and net profit to mother reached 867 billion yuan and 1,884 billion yuan respectively in the second quarter, up 36.39% and 75.80% year-on-year respectively. The company's main products, polyolefin and coke production, achieved year-on-year growth of 87% and 3%, respectively. Among them, polyethylene sales were 0.575 million tons, up 68.4% year on year, and polypropylene sales were 0.5722 million tons, up 79.2% year on year, which became the main source supporting the company's sharp increase in performance. In the first half of 2024, benefiting from falling coal prices, the profitability of coal-to-olefin increased significantly. Affected by this, the company's net interest rate reached 19.56%, an increase of 2.32 percentage points over the previous year. Among them, the net interest rate for the second quarter was 21.73%, up 4.87 percentage points from the previous year.
The Phase III project and the Inner Mongolia project are progressing steadily, creating room for growth. The company's Inner Mongolia project progressed smoothly. Construction of the first phase of the 2.6 million tons/year coal-to-olefin and 0.4 million tons/year green-hydrogen-coupled olefin project began in 2023. Halfway through the construction process that year, it is scheduled to be put into operation in 2024. The 3 #1 million-ton coal-to-olefin project in Ningdong was put into operation, adding 1.5 million tons/year of methanol production capacity, 1 million tons/year of olefin production capacity, 0.9 million tons/year of polyethylene and polypropylene production capacity, and 0.2 million tons/year of styrene plants; 1 million tons/year of coal mine production capacity approved; and 0.25 million tons/year EVA plant put into operation in February 2024. Preparations for the Ningdong Phase IV olefin project have been fully initiated.
Investment advice: The company is a leading domestic coal chemical enterprise. There are plenty of projects under construction, which are expected to support the company's continuous development in the future. The company's EPS is expected to be 1.1/1.7/1.9 yuan in 2024-2026, maintaining a “buy” rating.
Risk warning: risk of sharp fluctuations in raw material prices; project progress and benefits falling short of expectations; risk of domestic macroeconomic recovery falling short of expectations; risk of increased industry competition; risk of force majeure.