Satellite Chemistry ( Zhejiang Satellite Petrochemical Co.Ltd(002648) )
Event: Satellite chemistry released its 2021 annual report. During the reporting period, the company achieved an operating revenue of 28.557 billion yuan, a year-on-year increase of + 165.09%; The net profit attributable to the parent company was 6.007 billion yuan, a year-on-year increase of + 261.62%. In the fourth quarter, the company achieved an operating revenue of 8.539 billion yuan, a year-on-year increase of + 165.10% and a month on month increase of – 7.68%; The net profit attributable to the parent company in a single quarter was 1.751 billion yuan, a year-on-year increase of + 130.71% and a month on month decrease of – 17.79%.
The company also announced the plan for profit distribution and conversion of capital reserve into share capital in 2021. According to the plan, a cash dividend of 0.35 yuan per share will be distributed, and 10% of the net profit will be used as the capital reserve to increase 4 shares for every 10 shares to all shareholders.
Comments: during the reporting period, the company’s performance benefited from the rise of product end volume and price. The main reason for the volume end contribution is that Jiangsu Lianyungang Port Co.Ltd(601008) Petrochemical C2 phase I project was put into operation within this year. In terms of price, according to jinlianchuang data, the price indexes of the company’s main products polyethylene and polypropylene increased by 20.09% and 10.77% year-on-year respectively; The average ex factory prices of main products acrylic acid and butyl acrylate increased by 56.11% and 82.83% respectively year-on-year; The average prices of ethylene oxide and ethylene glycol increased by 8.67% and 37.15% respectively year-on-year. In the fourth quarter, the company realized a gross profit of 2.651 billion yuan, a month on month increase of – 14.07%; The gross profit margin was 31.04%, 2.31 PCT narrower than that in the third quarter. The fourth quarter profit fell month on month, mainly due to the US Gulf ethane price + 12.98% (Bloomberg data), rising costs and compressing the profits of some products.
C2 and C3 dual track engines boost growth, and various projects under construction are expected to be implemented successively during the year: according to the announcement, the original production capacity of the company in the carbon 3 industrial chain operates stably. In Q1 2022, 250000 T / a hydrogen peroxide (G3, G4) of the company is expected to be put into operation; At the beginning of Q2 in 2022, it is expected to continue to put into operation 180000 T / a acrylic acid and 300000 t / a acrylic acid. In addition, the company’s planned annual output of 800000 tons of PDH unit and 800000 tons / year butanol octanol and 120000 tons / year neopentyl glycol projects have been submitted for approval. In the carbon 2 industry chain, the units of 1.25 million T / a ethane cracking to ethylene, 400000 T / a polyethylene, 730000 T / a ethylene oxide and Shanghai Pudong Development Bank Co.Ltd(600000) T / a styrene of Jiangsu Lianyungang Port Co.Ltd(601008) Petrochemical phase II project are expected to be completed in June 2022. In terms of new materials, the company disclosed the project of green chemical new materials industrial park. The first phase project is expected to be implemented in 2022, including 200000 tons / year ethanolamine and 400000 tons of polystyrene, which is expected to be completed in the third quarter. Phase I 150000 T / a battery grade carbonate includes 60000 T / a DMC, 50000 T / a EC and 40000 t / a EMC, which is expected to be completed by the end of 2022. In the future, under the expectation of orderly implementation of various projects, the company’s profit is expected to rise to a higher level.
The crude oil price is on the high side, and the competitive advantage of the light hydrocarbon route appears: according to wind data, the average price of Brent crude oil has been US $99.97/barrel since 2022, up 25.18% compared with Q4 in 2021. Affected by the rising cost, the profitability of naphtha cracking route has decreased significantly. Compared with this, ethane cracking route can still maintain the profit level of more than 2000 yuan / ton.
Investment suggestion: maintain the Buy-A investment rating. Based on the implementation of project construction and other reasons, we raised the company’s net profit from 2022 to 2024 to RMB 8.349 billion, 10.764 billion and 12.478 billion respectively
Risk tips: raw material import risk, project construction failure to meet expectations, safety and environment risk, demand less than expected, etc
