Event: Sinopec Guande announced its semi-annual report for 2023. In the first half of 2023, the company's revenue was HK$309 million, down 4.62% year on year; net profit to parent was HK$744 million, up 108.73% year on year.
A Hong Kong-listed red chip subsidiary and the largest crude oil terminal service provider in China. In 2010, the company set new development goals to become a first-class international petrochemical warehousing and logistics company. In 2011, the company's crude oil terminal storage base plate was formed. Although the company once expanded into non-main business and overseas business, now the company's investment focus has refocused on the traditional advantage of domestic crude oil terminals, and continues to consolidate its leading position as the largest domestic crude oil terminal service provider. Sinopec holds more than 60% of the company's shares and is backed by a strong central enterprise parent company. The company can take greater steps and further expand its scale in foreign equity participation, mergers and acquisitions, and cooperation.
The downstream petrochemical industry is recovering moderately, and prospects for LNG imports are promising. For a long time, China's crude oil demand has far exceeded production, so imports are needed to fill the gap in demand. In the first half of 2023, 282 million tons of crude oil were imported, an increase of 11.7% over the previous year. As of August 2023, Shandong's refining operating rate had recovered to over 66%, and the downstream petrochemical industry had recovered moderately. As of July 2023, China's total natural gas imports were 66.876 million tons, and the average import dependency in recent years has been over 40%. It is difficult to rapidly increase the supply of domestically produced natural gas and imported pipelines in a short period of time. LNG transportation is essential to guarantee the supply of natural gas in China.
Petrochemical warehousing capabilities are strong, and LNG transportation provides a performance safety cushion. The petrochemical storage terminal companies owned by the company in China are evenly distributed along the coast of China, occupying the Yangtze River Delta, Pearl River Delta, and Bohai Rim economic circles. At the same time, the company accounts for more than half of the country's VLCC crude oil berths, and the company's overseas storage capacity is also beginning to take shape. After selling the pipeline business, the company's storage tank capacity level expanded in an orderly manner, and the performance of the LNG transportation business continued to improve.
Profit prediction and investment advice: Considering that the company has sufficient cash to actively explore the market, it is expected to drive an increase in overall tank capacity levels. The company continues to lay out the LNG transportation business, and is expected to enjoy higher profits while consolidating its leading position as a domestic crude oil terminal service provider. The company was given a valuation of 10 times in 2023, corresponding to a target price of HK$4.90. It was covered for the first time, and given a “buy” rating.
Risk warning: risk of global economic recession, risk of terminal shoreline and land resource restrictions, production safety risks, etc.