In 2023, the company achieved operating income of 82,640 billion yuan, an increase of 33.30% over the previous year; net profit to mother was 797 million yuan, an increase of 539.10% over the previous year. In the first quarter of 2024, we achieved revenue of 21.111 billion yuan, up 32.66% year on year, up 1.02% month on month; net profit to mother was 580 million yuan, turning a loss into a profit year over year. New production capacity for polyester filaments has been released, and production and sales have increased dramatically. We are optimistic that the company's business will continue to improve and maintain its purchase rating.
Key points to support ratings
The popularity of polyester filament has been restored, and the company's production and sales have increased dramatically. In 2023, as domestic steady growth policies continue to gain strength, downstream demand in the polyester filament industry improved markedly compared to 2022. Product sales volume and price differences widened, and the industry as a whole was recovering. In 2023, the company achieved sales of 10.3071 million tons of filament, an increase of 34.97% over the previous year. The production and sales volume of polyester filament increased dramatically, which led to a significant increase in the company's revenue. Among them, POY/FDY/DTY sales were 784.37/146.94/99.4 million tons respectively, up 35.36%/38.48%/27.32% year-on-year. In the first quarter of 2024, the company achieved sales of 2.585 million tons of filament, of which POY/FDY/DTY sales volume was 193.51/41.53/234,600 tons respectively, up 37.43%/36.93%/12.68% year-on-year. In 2023, the profitability of polyester filament increased slightly. POY/FDY/DTY achieved revenue of 531.62/111.80/8.249 billion yuan respectively, up 30.87%/36.67%/21.46% year on year, and POY/FDY/DTY gross margin of 5.22%/9.81%/2.53% respectively, up 2.35 pct/2.38 pct/2.06 pct year on year, respectively. In terms of period expenses, due to increased financial interest expenses, financial expenses for 2023 were 783 million yuan, up 83.49% year on year, and financial expenses for the first quarter of 2024 were 273 million yuan, up 120.90% year on year.
In the future, with the recovery of downstream demand for polyester filaments and the optimization of the competitive landscape of the industry, the company's profitability may continue to improve.
Zhejiang Petrochemical's profit declined in 2023, and investment income is expected to pick up in the future. In 2023, the company's investment income was 321 million yuan, a year-on-year decrease of 73.93%. Among them, the company held 20% of Zhejiang Petrochemical's shares, and Zhejiang Petrochemical achieved net profit of 1,367 million yuan in 2023, corresponding investment income of 273 million yuan, a decrease of 937 million yuan compared to 2022. In the first quarter of 2024, the company's investment income was 256 million yuan, an increase of 157.61% year-on-year. In 2023, Zhejiang Petrochemical's product structure was further enriched. In the future, as the prosperity of the petrochemical industry recovers, the company's investment income is expected to increase significantly.
The complete layout of the industrial chain was initially achieved, and comprehensive competitiveness was enhanced. In 2023, the spatial layout of the company's entire national industrial chain has been initially formed, adding about 3.9 million tons of polyester filament production capacity and 3 million tons of PTA production capacity.
By the end of 2023, the company had a polyester filament production capacity of about 13.5 million tons/year and PTA production capacity of about 10.2 million tons/year. Among them, the three sets of polyspinning devices for the Hengyang project were fully produced in the first half of 2023, and the Hengchao Phase II and Yuxin projects all exceeded the target tasks; the Hengchao Phase III project started in the second half of the year to enhance the company's differentiated new material production capacity; the Zhongkun project was successfully put into operation to achieve the revolutionary transformation of “fuel to raw materials, raw materials to materials”, helping the company successfully open up a new link from “one side of gas” to “one pip of cloth”; at the end of the year, Jiatong 8 sets of spinning devices, 2 sets of PTA devices and supporting projects were fully constructed It was completed and put into production.
The scale of the company's production capacity continued to expand, the industrial chain was further extended, and its overall competitiveness was boosted.
valuations
Taking into account changes in the polyester filament industry and adjusting profit forecasts, the company's net profit for 2024-2026 is estimated to be 3.110 billion yuan, 4.193 billion yuan, and 5.568 billion yuan, respectively, and EPS of 1.29 yuan, 1.74 yuan, and 2.31 yuan, respectively. Corresponding to current price-earnings ratios of 11.4 times, 8.4 times, and 6.4 times, respectively, maintaining the purchase rating.
The main risks faced by ratings
Downstream demand recovery fell short of expectations, prices of upstream raw materials fluctuated sharply, industry production capacity increased dramatically, etc.