Satellite Chemistry ( Zhejiang Satellite Petrochemical Co.Ltd(002648) )
Event: the company released its first quarterly report. In the first quarter of 2022, it achieved an operating revenue of 8.138 billion yuan, a year-on-year increase of 124.54%, a slight decrease of 4.70% month on month, and a net profit attributable to the parent company of 1.521 billion yuan, a year-on-year increase of 98.44% and a month on month decrease of 13.12%. The company’s performance met expectations.
Under the fluctuation of oil price, the company’s price transmission is smooth and new projects are advancing steadily: the first phase of the company’s C2 project has operated well since it was put into operation in May 2021, which is the main reason for the significant year-on-year growth of the company’s performance. 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. Although the price of propane in C3 project rises, the company supports downstream acrylic acid and ester. As a leading company in acrylic acid industry, it has strong pricing power and is expected to ensure the profitability of C3 project through price transmission. On April 8, 2022, one of the overseas traditional leaders of acrylic acid, Japan Chukuang Xingchan announced to withdraw from the acrylic acid business, which will make the competition pattern of acrylic acid more concentrated. At the same time, the company’s new projects are advancing smoothly. The C2 phase II project is expected to be put into trial production in the middle of 2022, and the new material industrial park project is expected to be completed and trial production in the third quarter of 2022, driving the company’s performance to a higher level in 2022. In the first quarter of 2022, the gross profit margin and net profit margin of the company were 29.06% and 18.82% respectively, with a slight decrease of 1.95 and 1.73 percentage points respectively.
Layout of new material business: in the longer term, relying on the advantages of high-quality raw materials, the company continues to extend the original C2 and C3 industrial chains to the field of high value-added new materials: Jiangsu Lianyungang Port Co.Ltd(601008) base C2 industrial chain downstream layout of polyether monomer, ethanolamine, vinyl amine, EAA and Poe NEW materials, while focusing on the rapid development of downstream industries such as new energy batteries and photovoltaic, The company plans to build a 150000 ton lithium electrolyte solvent and additive project (including DMC, EC, Dec, EMC and PC5 solvents and FEC and VC additives) from the end of 2022 to 23 years. 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 RMB 9.04 billion, RMB 11.50 billion and RMB 13.54 billion respectively, corresponding to PE of 6.3, 4.9 and 4.2 times 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.
