Q1 incremental cost reduction was a significant year-on-year loss. Focus on the contribution of the second phase of olefin production. The company that maintained the “purchase” rating released its 2024 quarterly report. 2024Q1 achieved revenue of 3.39 billion yuan, or -1.61% of the same period, net profit to mother of -0.24 million yuan. The same period in 2023 was -139 million yuan, net profit after deducting non-return to mother of -35 million yuan, and -180 million yuan for the same period in 2023. The cost of 2024Q1's main raw materials dropped significantly year-on-year, and the profitability of the olefin and carbon black sectors may rise; the coal coke and fine chemicals sectors may continue to be under pressure due to large product price declines.
We maintain our profit forecast for 2024-2026, and expect to achieve net profit of 3.4/56/ 750 million yuan in 2024-2026, an increase of 143.6%/66.6%/34.3% year over year; EPS is 0.39/0.66/0.88 yuan, corresponding to the current stock price, PE is 18.1/10.8/8.1 times. The first phase of the Qingdao olefin project is mature, and the second phase of construction has already entered the commissioning stage. Future production capacity growth is expected to reduce costs and increase efficiency, maintaining a “buy” rating.
Q1 The average price of major products rose and fell, and olefin and carbon black products entered the repair stage in the olefin sector: 2024Q1 olefin production 179,000 tons, +8.7% year over year, sales volume of 180,000 tons, +25.3% year over year, sales price 6,394 yuan/ton, -5.4% year on year, sales revenue 1.15 billion yuan, +18.6% year on year, and the price of propane as the main raw material was 4555 yuan/ton, -13.1% year over year. Raw materials have declined significantly, and the olefin sector may lose money. Carbon black sector: 2024Q1 carbon black production was 147,000 tons, +12.9% year on year, sales volume +26.6% year on year, price of 7189 yuan/ton, -17.5% year on year, sales revenue 1.04 billion yuan, +4.5% year on year, and the price of the main raw material coal tar/anthracene oil was -21.8%/-17.1% year over year. The price of coal tar has dropped significantly, and the gross profit of carbon black may have recovered somewhat. Coal coke sector: 2024Q1 coal coke products sold output of 347,000 tons, +1.1% year on year, sales volume of 338,000 tons, -1.5% year on year, price of 2,292 yuan per ton, -19.4% year on year, sales revenue 770 million yuan, -20.6% year on year, and -12.3% year on year.
The sales price of coal coke products has dropped significantly, and gross profit may have declined. Fine chemicals sector: sales volume of fine chemical products was 0.6 million tons, YoY +19.45%, output 0.64 million tons, +17.9% YoY, price per ton was 17,942 yuan, -28.43% YoY, sales revenue 120 million yuan, -15.7% YoY. Prices of fine chemical products have dropped significantly, and profits may still be under pressure.
The two major bases focus on recycling chemicals, and the second phase of Qingdao is progressing steadily
Qingdao base: construction of a comprehensive utilization project for new materials and hydrogen energy. The first phase of the project was fully put into operation in 2021, mainly including 900,000 tons/year propane dehydrogenation, 450,000 tons/year high-performance polypropylene, 480,000 tons/year green carbon black recycling project, and 600,000 cubic meter underground cave project. Qihe base: Using coal as the raw material, coking as the base, and gas as the carrier, we are committed to developing in the direction of specialization and refinement of the industrial chain. At present, the construction and safety of the new 40,000 tons/year potassium sorbate project at the Qihe base has basically been completed. After the project is put into operation, the company's Qihe base will form a production pattern of 1.5 million tons/year of coke, 100,000 tons/year of methanol, 100,000 tons/year of synthetic ammonia, 300,000 tons/year of coal tar deep processing, 240,000 tons/year of carbon black, 40,000 tons/year of potassium sorbate, and 15,000 tons/year of para-methylphenol. Qingdao Phase II: The 900,000 tons/year PDH and 2*450,000 tons/year high-performance polypropylene project is progressing steadily. After all the projects are put into operation, the company's PDH production capacity will increase from 900,000 tons/year to 1.8 million tons/year, and olefin production capacity will increase from 450,000 tons/year to 1.35 million tons/year. Looking ahead to the future market, demand for olefins is expected to improve as the economy recovers, infrastructure supports demand for steel and coke, and price differences between the company's main products are expected to be repaired, and performance may enter the repair channel.
Risk warning: risk of falling product prices, risk of rising raw material prices, risk of new construction projects falling short of expectations.