Xinfengming is one of the leading companies in the polyester filament industry. He is optimistic about the restoration of the prosperity of the polyester filament industry and the development model of the company's integrated refining and chemical business. It was covered for the first time and given a purchase rating.

Key points to support ratings

Xinfengming is one of the largest polyester filament manufacturers in China. The actual controller is Mr. Zhuang Kuilong. As of the 2024 semi-annual report, the company has a polyester production capacity of 8.6 million tons/year, of which the polyester filament production capacity reached 7.4 million tons, and the domestic market share exceeds 12%. The company's industrial layout is concentrated in the four “two continents and two lakes” bases. In 2012-2023, the company's revenue grew from 9.448 billion yuan to 61.469 billion yuan, with a compound growth rate of 61.469 billion yuan 18.56% In the first half of 2024, the company achieved operating income of 31.272 billion yuan, a year-on-year increase of 10.96%, and net profit to mother of 0.605 billion yuan, an increase of 26.17% year-on-year.

The pressure to expand production of polyester filaments has been reduced, and the industry's prosperity has gradually increased. On the supply side, new production capacity has declined markedly. According to Baichuan Yingfu statistics, the industry's additional production capacity is expected to be 0.9 million tons in 2024, which is only 18.87% of the new production capacity in 2023. At the same time, the industry's backward production capacity is being cleared. Longzhong News expects the production capacity of polyester filament to be between 2-2.5 million tons in 2024-2025. On the demand side, in terms of domestic demand, China's per capita clothing consumption is significantly lower than that of developed countries. With the high-quality development of China's economy and the improvement of people's living standards, there is still room for growth in China's textile and garment consumption demand. In terms of external demand, polyester filament exports are expected to grow as the global economy recovers and the inflection point of overseas textile clothing storage approaches. As the relationship between supply and demand improves, profits in the filament industry are expected to gradually recover. The company's production capacity is among the highest in the industry, and its performance is flexible. Based on production capacity estimates at the end of 2023, the price difference of filament will increase by 100 yuan/ton, and the company's profit will increase by 0.555 billion yuan. With the release of new production capacity and the commissioning of construction capacity, the company's performance flexibility is expected to further increase.

The product matrix is rich, and industrial chain integration can be expected. The company currently has a production capacity of 1.2 million tons of polyester staple fiber, effectively enriching the company's polyester product structure, and rationally planned a PTA production capacity of 5.4 million tons on the basis of Dushan Energy's 5 million ton PTA production capacity. Relying on the technological latecomer advantages of the new production capacity and the supporting advantages of raw materials, it has strong industry competitiveness. Furthermore, the company is determined to expand the upstream industrial chain and plans to build a joint venture with Tongkun Co., Ltd. to build an integrated refining and chemical project in Indonesia. With the release of the company's new product capacity, performance stability is gradually increasing, and the integrated development model can be expected in the future.

valuations

The company's net profit for 2024-2026 is 1.538 billion yuan, 1.965 billion yuan, and 2.616 billion yuan, corresponding EPS (diluted) of 1.01 yuan, 1.29 yuan, and 1.72 yuan, corresponding price-earnings ratios of 9.8 times, 7.7 times, and 5.8 times; net assets per share are 11.7 yuan, 12.5 yuan, and 13.6 yuan, respectively. The corresponding net market ratio is 0.8 times, 0.8 times, and 0.7 times, respectively. Optimistic about the restoration of prosperity in the polyester filament industry and the direction of integrated refining and chemical development. It was covered for the first time and given a buying rating.

The main risks faced by ratings

Global economic growth falls short of expectations, raw material prices fluctuate greatly, exchange rates fluctuate greatly, and environmental and safety regulatory risks.