Satellite Chemistry ( Zhejiang Satellite Petrochemical Co.Ltd(002648) )
Event: the company released its annual report for 2021. In 2021, the company achieved an operating revenue of 28.557 billion yuan, a year-on-year increase of 165.09%, and a net profit attributable to the parent company of 6.007 billion yuan, a year-on-year increase of 261.62%; The net profit after deduction was RMB 5.852 billion, a year-on-year increase of 269.05%. The company also announced the profit distribution plan, which plans to distribute a dividend of 3.5 yuan (including tax) for every 10 shares and increase 4 shares for every 10 shares to all shareholders with the capital reserve.
The ethylene project was put into operation, and the profit of acrylic acid industry chain increased, which promoted the performance growth. In May 2021, the phase I project of the company’s ethane cracking to ethylene project was successfully put into operation, with good operation throughout the year, contributing to the performance increment of the company Jiangsu Lianyungang Port Co.Ltd(601008) petrochemical project achieved an annual operating revenue of 7.79 billion yuan and a net profit of 1.612 billion yuan, which was an important driving factor for the growth of annual performance. In terms of acrylic acid industry chain, the company’s production capacity of 180000 T / a acrylic acid and 300000 t / a acrylic acid at the beginning of 2021 also contributed to some increment. Affected by the tight supply and demand, the annual price of acrylic acid and acrylate products of the company increased significantly, and the industry boom increased significantly. According to the data of Zhuo Chuang information, the average market price of acrylic acid in 2021 was 1198273 yuan / ton, a year-on-year increase of 68.73%; The average market prices of methyl acrylate and butyl acrylate were 157568 and 1639047 yuan / ton respectively, with a year-on-year increase of 69.12% and 92.63%. The product price difference also increased significantly, which promoted the growth of acrylic acid business revenue and profit. Driven by many factors, the company achieved an operating revenue of 28.557 billion yuan, a year-on-year increase of 165.09%, a net profit attributable to the parent company of 6.007 billion yuan, a year-on-year increase of 261.62%, and a significant increase in performance.
In terms of specific products, the company’s functional chemicals business achieved an operating revenue of 19.385 billion yuan in 2021, with a year-on-year increase of 281.67%, a gross profit margin of 37.58%, and a year-on-year increase of 5.98 percentage points; The operating revenue of polymer new materials business was 2.719 billion yuan, with a year-on-year increase of 218.39% and a gross profit margin of 33.21%, an increase of 5.16 percentage points; New energy materials achieved an operating revenue of 233 million yuan, a year-on-year increase of 0.97%, and the gross profit margin was 47.26%, an increase of 6.66 percentage points.
Crude oil has entered the high oil price range, and the competitive advantage of ethane cracking project is significant. Since the end of 2021, with the rising demand and supply constraints, the global crude oil price has risen rapidly and gradually entered the high oil price range. The recent conflict between Russia and Ukraine has further exacerbated the tense situation of global crude oil supply and promoted the further rise of oil price. As the global ethylene mainly comes from oil cracking, its price is highly correlated with crude oil. In the case of high crude oil prices, the company’s competitive advantage of ethane cracking to ethylene is expected to improve. The company’s ethane comes from the by-product of shale gas in the United States. Due to the overall excess supply, its price is relatively low and its correlation with crude oil is weak, which brings great cost advantages to the company’s ethane cracking to ethylene project.
In recent years, there have been many plans for ethane cracking to ethylene projects in China, but it is difficult to implement them. The project has great barriers in ethane acquisition, port terminals, pipe network resources and project site selection. Therefore, it is expected that the company’s ethylene project competitiveness is expected to be maintained in the future, with significant first mover advantage.
In the future, the production capacity will be expanded in an orderly manner, and the performance growth momentum will be full. In the future, the company will have many planned projects and orderly expansion of production capacity, which will bring sufficient power to the subsequent performance growth Jiangsu Lianyungang Port Co.Ltd(601008) Petrochemical phase II project is expected to be completed and put into operation within this year, including 1.25 million T / a ethane cracking, 400000 T / a high-density polyethylene, 730000 T / a ethylene oxide and Shanghai Pudong Development Bank Co.Ltd(600000) T / a styrene Jiangsu Lianyungang Port Co.Ltd(601008) Petrochemical’s supporting downstream Green New Material Industrial Park Phase I project is being carried out in an orderly manner, including 100000 t / a ethanolamine, 400000 T / a polystyrene, 150000 T / a battery grade carbonate and 300000 t / a carbon dioxide refining and recovery. It is expected to be put into operation in batches in the third / fourth quarter of 2022. In addition, the new energy and new material integration project of Pinghu base is expected to be completed by the end of 2023.
In the next two years, the company’s series of new projects will further consolidate the company’s industrial chain and explore new growth points in the field of new energy, new materials and functional chemicals. In the future, the company will use the unique ethane supply chain to further promote the construction of new projects, give full play to the green and low-carbon advantages brought by the lightweight of raw materials, and continue to expand the new product system of new energy, new materials and functional chemicals. Under the guarantee of multiple projects, the company has a solid foundation for future performance growth.
Profit forecast and investment rating: it is estimated that the company’s EPS in 2022 and 2023 will be 4.87 yuan and 5.98 yuan, and the PE will be 8.89 times and 7.24 times respectively based on the closing price of 43.28 yuan on March 24. The valuation of the company is low and the future growth potential is large. The company is given a “buy” investment rating.
Risk warning: the price of raw materials has risen sharply and the progress of the project is lower than expected
