Incidents:
The company released its report for the third quarter of 2018. The announcement showed that in the first three quarters of 2018, the company achieved operating income of 16.601 billion yuan, an increase of 121.52% over the previous year; the net profit of the mother was 291 million yuan, an increase of 594.79% over the previous year; the basic earnings per share were 0.62 yuan, an increase of 513.33% over the previous year; and the net cash flow from operating activities per share was 1.576 yuan, an increase of 172.19 times the previous year. Looking at a single quarter, Q3 2018 achieved revenue of 6.321 billion yuan, an increase of 146.05% over the previous year and an increase of 31.85% over the previous quarter; Guimu's net profit was 64 million yuan, an increase of 207.52% over the previous year, and a decrease of 48.62% over the previous quarter.
Key points of investment:
The company integrates “trade - logistics - warehousing - production - R&D - sales - finance”. It is mainly engaged in energy investment and production, petrochemical storage, transportation and trade, etc., with a complete industrial sector. Currently, it owns companies such as Ningbo Haiyue New Materials, Zhuji Yuedu Petroleum, Tianjin North Petroleum, and Haiyue Asset Management. The company's business segments include the production of products such as propylene, isooctane, and methyl ethyl ketone using propane and carbon four as raw materials; storage, wholesale and retail of gasoline, diesel and liquefied gas; equity investment and property leasing; terminal handling, warehousing, and trade operations for various types of oil and liquid chemicals. Ningbo Haiyue (51% of the company's shares), a holding subsidiary of the company, mainly produces and sells products such as propylene, isooctane, methyl ethyl ketone, etc. The first phase of the Ningbo Haiyue Propane and Hybrid Carbon Four Utilization Project was officially put into operation in 2015. It has 600,000 tons of propane dehydrogenation to propylene (PDH) plants with an annual output of 600,000 tons of isooctane plants and 40,000 tons of methylethane plants, as well as supporting terminals, storage tanks, steam and environmental protection devices. Beifang Petroleum is mainly engaged in terminal handling, storage and trading of various types of oil products and liquid chemicals. A 50,000-ton specialized petrochemical terminal with an annual turnover of over 10 million tons and a storage area of 850,000 cubic meters for crude oil, refined oil products and chemical products have been built at Tianjin Port. Beifang Petroleum has established long-term strategic partnerships with upstream and downstream enterprises. Zhuji Yuedu Petroleum has a 520,000 ton oil product depot, a 2,200-cubic liquefied gas depot, and ancillary facilities such as supporting special railway lines, and 11 gas stations. Judging from the propane price situation we have tracked, the average propane (FOB, Middle East) price and propane (FOB, Texas MB) average price in Q3 2018 rose 13.33% and 13.04% respectively from Q2, and the devaluation of the RMB caused exchange losses. PDH costs increased significantly, and the 2018 Q3 performance declined month-on-month.
Country 5 is upgraded to country 6, and demand for isooctane is expected to increase in the future. On June 13, the executive meeting of the State Council deployed and implemented a three-year action plan to defend the blue sky, which proposed that the full supply of China's six gasoline and diesel would begin on January 1, 2019. The national six standard was upgraded to the national five standard, further reducing the content of aromatic hydrocarbons and olefins. Due to the high octane value of aromatic hydrocarbons and olefins, the loss caused by the decline in the content of such substances to the octane value of gasoline (gasoline explosion resistance index) needs to be increased by increasing explosion-resistant agents. The main ones are methyl tert-butyl ether (MTBE) and iso-octane, but MTBE is a potential water pollutant. Currently, the US has banned MTBE blended with gasoline. Japan has set an upper limit on the MTBE addition ratio. According to the calculation of 130 million tons of gasoline production in China in 2017, the amount of isooctane added will increase by 1%, increasing demand for isooctane by 1.3 million tons. Future demand for isooctane is expected to increase demand by 1.3 million tons of isooctane. Big growth. However, according to the company's semi-annual report, the country's iso-octane production capacity continued to expand in the first half of 2018. Supply and demand increased slightly. Production capacity increased 1.1 million tons compared to 2017, an increase of 7.81%. Isooctane products are affected by tight raw materials, industry barriers, oil standards and consumption taxes, and production and operation are still under some pressure.
Profit forecast and investment rating: Based on the judgment of the company's PDH profit maintenance and the increase in gross margin of refined oil products, isooctane, etc., the estimated operating income from 2018 to 2020 is 349/421/453 million yuan respectively. Earnings per share are 0.74/0.89/0.96 yuan respectively, and the corresponding closing price of PE is 12/10/9 times, respectively, maintaining the purchase rating.
Risk warning: the risk of a sharp drop in product prices, the risk of large fluctuations in the RMB exchange rate, the risk of a trade war between China and the US, and the risk that demand for isooctane falls short of expectations.