Description of the event

The company announced its 2024 semi-annual performance forecast. It is expected to achieve attributable net profit of 1-1.15 billion yuan, an increase of 849.4%-991.8%, after deducting non-attributable net profit of 0.85-1 billion yuan, an increase of 2186.6%-2554.9%, and net profit attributable to investment income in associated enterprises and joint ventures of 0.6-0.75 billion yuan, an increase of 31.9%-64.8%. According to the quarterly report's performance estimates, 2024Q2 is expected to achieve net profit of 0.42-0.57 billion yuan, after deducting non-vested net profit of 0.31-0.46 billion yuan, and net profit attributable to investment income of 0.27-0.42 billion yuan in associated enterprises and joint ventures.

Incident comments

2024Q2 polyester filament is profitable first weak and then strong. Since 2024Q2, due to falling oil prices and high factory inventories, polyester filament manufacturers have been in a passive position in the game with downstream, and benefits have been squeezed. Entering late May, leading companies adopted a “one price” strategy, raised prices and cancelled all discounts. According to the Chemical Fiber Information Network, prices of various varieties rose sharply on May 23. Among them, POY, the main products of Tongkun, Xinfengming, and Hengyi increased the most. According to data estimates from China Fiber Network and Chemical Fiber Information Network, the average POY price differences in April, May, and June of this year were 125 yuan/ton, 99 yuan/ton, and 392 yuan/ton respectively. After a period of low production and sales, leading production and sales reached volume in early June, and profits improved significantly. Looking ahead to the future market, downstream elastic weaving will usher in the traditional low season of construction in July, and the operating rate is declining, while filament companies are expected to ease inventory pressure through additional production cuts and wait for the “gold nine silver ten” peak season to arrive. Under the already tight supply and demand situation, the leading “one price” is expected to rise further, and the price spread is worth looking forward to.

I am optimistic about the optimization of the supply and demand pattern of polyester filament, and the boom will improve. Demand side: The apparent consumption of polyester filament in China increased from 21.17 million tons in 2014 to 43.05 million tons in 2023, with a compound growth rate of 8.2%; as the largest category of chemical fiber, polyester has excellent properties such as high elasticity, wear resistance, heat resistance, etc., and its price has obvious advantages over traditional natural fibers such as cotton, etc., and applications such as cotton and wool continue to expand, and the proportion is increasing year by year; overseas clothing stocks have experienced a long process of elimination, which is expected to usher in an improvement in upstream fabric demand. Supply side: The industry boom has bottomed out in the past 2 years, and production capacity of nearly 3 million tons/year has been cleared.

According to our statistics, the net new production capacity of the polyester filament industry in 2024 was only about 410,000 tons, accounting for about 0.8% of the total domestic polyester filament production capacity, and the supply increase was extremely limited; in 2025, the polyester filament industry had some additional production capacity, but the production capacity of various companies expanded in an orderly manner. The tight supply and demand pattern is expected to continue, at least there is no significant excess; in the medium to long term, leading capital expenditure will shift to overseas refining and refining, and domestic polyester filament production expansion is expected to continue at a slower pace. We are optimistic that the supply and demand of polyester filament will improve, and the industry will usher in an upward cycle.

The layout is overseas refining and chemical, and the growth rate is excellent. In June 2023, the company issued an announcement to launch Taikun Petrochemical's Indonesian refining and chemical integration project. In May 2024, the company announced the Taikun Petrochemical project equity structure, investment amount, and project scale adjustment announcement. The company will hold 80% of Taikun Petrochemical's shares in total through Tongkun Hong Kong. The total investment amount of Taikun Petrochemical will be adjusted to 5.95 billion US dollars. The project scale is 10 million tons/year oil refining, 2 million tons/year for xylene, etc., with broad prospects for overseas refining. Open up space for the company's long-term development.

Maintain a “buy” rating. The company is the leading domestic polyester filament. It has ranked first in production and sales for many years. It is expected to benefit from the upward trend in polyester filament, huge flexibility, overseas refining and chemical layout, and broad room for growth. The company's net profit is expected to be 3.22, 4.43, and 5.44 billion yuan respectively in 2024-2026, maintaining a “buy” rating.

Risk warning

1. Industry self-discipline falls short of expectations;

2. Demand for clothing falls short of expectations.