Satellite Chemistry ( Zhejiang Satellite Petrochemical Co.Ltd(002648) )
Event: the company released its annual report for 2021. In 2021, the company realized an operating revenue of 28.557 billion yuan, a year-on-year increase of 165.09%, and realized a net profit attributable to the parent company of 6.007 billion yuan, a year-on-year increase of 261.62%. In Q4, the company realized an operating revenue of 8.539 billion yuan, a year-on-year increase of 165.10%, a month-on-month decrease of 7.68%, and a net profit attributable to the parent company of 1.751 billion yuan, a year-on-year increase of 130.71% and a month-on. The company’s performance is in line with expectations. The company distributed a cash dividend of 3.50 yuan (including tax) to all shareholders for every 10 shares, and increased 4 shares for every 10 shares to all shareholders with capital reserve. When the C2 project is put into operation, the company will increase the price, and the C3 project will be put into operation:
1) the first phase of the 2.5 million ton ethane cracking to ethylene project planned by the company in Jiangsu Lianyungang Port Co.Ltd(601008) has operated well since it was put into operation in May 2021. In 2021, the company achieved an operating revenue of 7.79 billion yuan and a net profit of 1.612 billion yuan, which is the main reason for the significant year-on-year growth of the company’s revenue and performance in 2021. We believe that C2 project has very high barriers in the implementation of ethane resources, port resources, transportation and project site selection, and the cycle is very long. The company has overcome many difficulties and become one of the few successful projects with obvious first mover advantage. Since 2022, the oil price has fluctuated greatly, but the company’s raw material ethane price is not directly affected by crude oil and natural gas, but more affected by its own supply and demand. Due to the rise of oil price cost, the price difference at the product end remains stable and the transmission is smooth.
2) in 2021, the volume and price of the company’s C3 industrial chain rose simultaneously. In 2021, the company’s 180000 ton acrylic acid and 300000 ton acrylic acid projects were successfully started at one time. At the same time, the C3 industrial chain maintained a high boom. According to Zhuo Chuang information, the average prices of acrylic acid and butyl acrylate in 2021 were 11983 yuan / ton and 16390 yuan / ton respectively, up 69% and 93% year-on-year.
3) in 2021, the gross profit margin of the company was 31.72%, with a year-on-year increase of 3.02 percentage points, and the net profit margin was 21.06%, with a year-on-year increase of 5.67 percentage points. The weighted average roe was 36.42%, with a year-on-year increase of 20.49 percentage points.
The projects under construction are full and the next five years can be expected: the company formulated the “double five year plan” in 2017, which clearly defined the development goal of building a low-carbon chemical new material technology company with lightweight raw materials as the core. In 2022, the phase II project of Jiangsu Lianyungang Port Co.Ltd(601008) base is expected to be completed in mid-2022. The phase I project of green new material industrial park is carried out smoothly, and it is planned to be completed successively in the third and fourth quarters of 2022, It is expected to drive the company’s profits to a higher level. At the same time, relying on the advantages of green and low-carbon lightweight raw materials, the company will accelerate the construction of three business segments: functional chemicals, new polymer materials and new energy materials, and will continue to extend the original C2 and C3 industrial chains to the field of high value-added new materials in the future The downstream of C2 industrial chain of Jiangsu Lianyungang Port Co.Ltd(601008) base is equipped with polyether macromonomer, ethanolamine, vinylamine, EAA and Poe new materials. At the same time, 150000 tons of lithium electrolyte solvent and additive projects are planned around the fast-growing downstream industries such as new energy batteries and photovoltaic. With the continuous expansion of new material business, the overall profitability of the company will continue to rise.
Profit forecast and investment suggestions: we are optimistic that the company will build a complete integrated industrial chain around C2 and C3 industrial chains. Under the background of carbon neutrality, low-carbon raw materials have significant advantages. After the projects under construction are put into operation, the company’s profit center is expected to gradually step to a new level. We expect the net profit attributable to the parent company from 2022 to 2024 to be 9.04 billion yuan, 11.50 billion yuan and 13.54 billion yuan respectively, corresponding to 8.1, 6.4 and 5.4 times of PE respectively. We maintain the “buy” rating and continue to recommend.
Risk warning: Jiangsu Lianyungang Port Co.Ltd(601008) project construction progress is less than expected, cost and transportation are uncontrollable, and Sino US trade friction risks.
