Rongsheng Petrochemical (002493) 2019 Third Quarterly Report Review: Zhejiang Petrochemical Commences Producing Profits from Private Refining and Chemicals for a Long Time

Rongsheng Petrochemical (002493) 2019 Third Quarterly Report Review: Zhejiang Petrochemical Commences Producing Profits from Private Refining and Chemicals for a Long Time
On October 28, 2019, the company released its third quarter report for 2019: revenue of 596.5.8 billion a year -5.36%; realized net profit attributable to mother 18.46 trillion, ten years +0.92%; estimated average return on net assets increased by 8.54%, a decrease of 2 per year.17 units.  In Q3 2019, a single quarter of revenue was 201.66 ppm, at least -21.01%; net profit attributable to mother 8.00 ppm, +16 a year.98%; estimated average return on net assets increased by 3.64%, increasing by 0 every year.64 units.  Comments: 1, 2019Q3 return to the mother’s net profit 杭州夜网 for two years +16.98%, slightly more than expected.  In Q3 2019, the company realized net profit attributable to mother 8.00 ppm, +16 a year.98%, mainly due to the increase in PTA profits (investment income) caused by the decline in raw materials. At the same time, government subsidies and the increase in futures fair values also contributed to the performance.  As for the price difference, in the third quarter of 2019, the average price difference of PTA was 1,061 yuan / ton, which was -17 for many years.18%, MoM-18.37%.The average price difference of polyester filament POY was 1631 yuan / ton, up to -7.44%, +14.55%; FDY average spread is 1786 yuan / ton, continuous -0.32%, -5.57%; the average spread of DTY is 2978 yuan / ton, for many years -4.71%, MoM-1.64%.  2. The 4000-ton / year integrated refining and chemical integration project (Phase 1) is expected to be completed.  The second-phase project intends to raise funds through non-public offerings and is optimistic about Zhejiang Petrochemical’s profitability.  Zhejiang Petrochemical is the company’s “crude oil-PX-PTA-polyester filament” layout of the entire industry chain. It plans to build a 4,000-ton / year integrated refining and chemical integration project (in two phases), each phase replacing 2000 / year refining, 400Lbs / year PX, 140 lbs / year ethylene, 26 PCs, National Six standard oil products, etc. On May 21, 2019, the 4000-ton / year refining and chemical integration project (Phase 1) has completed engineering construction, equipment installation and commissioningWaiting for the preliminary work, the relevant equipment has been put into operation, and the first batch of equipment (atmospheric decompression and related public engineering equipment, etc.) is running.The whole process is expected to be completed by the end of the year.On September 20, 2019, the company responded to the second feedback on the application documents for non-public offering of shares. The company intends to raise no more than 8 billion through non-public offering of shares for use in Zhejiang Petrochemical’s 4000-scale / year refining and chemical integration project.Period of fixed asset occupation.Rongsheng Petrochemical has passed the most difficult moment and ushered in the dawn of victory.  According to our calculations, the first stage (2000 / year) of Zhejiang Petrochemical Refining and Petrochemical Project has an 80% probability that the net profit per ton of crude oil processed will be 447-532 yuan / ton.The total net profit range is 89.4-106.4 trillion, the center is 97.900 million.  3. The size of PTA is higher in 2019, and the price is supported by growth. The release of PX’s production capacity has released the expanded PTA profit. The PTA industry has experienced a downturn of more than 4 years. The production capacity has increased significantly, and the operating rate has steadily rebounded.The center moves up.In 2018, the nominal capacity of the PTA industry was maintained at 5129 / the operating rate increased to 78.8%, the operating rate is expected to increase to 83% in 2020, the supply and demand pattern has improved significantly.The company’s participation in controlling PTA’s total production capacity is about 1,350 tons (28% of the country’s total production capacity), of which 590 shares of equity capacity, PTA spread increases by 100 yuan / ton (excluding tax), the company’s net profit will increase by 5.90 trillion, elastic toughness.And due to the continuous release of PX capacity of private refining and chemical industry, PX prices have expanded and the PTA spread has been extended, significantly improving performance.  The company announced on September 19, 2019 that Zhejiang Yisheng New Materials Co., Ltd., a subsidiary of the company, plans to invest in the construction of a PTA project with an annual output of 600 tons. The project will be implemented in two phases and the total investment is 杭州桑拿网 expected to be 67.3.1 billion.The first phase of the project will further enhance the company’s cost advantage and profitability on PTA. The company announced on September 19, 2019 that the company’s subsidiary Yisheng Dahua Petrochemical Co., Ltd. plans to invest 25.17 million US dollars to build a “100-ton multi-functional polyester chip project”, which mainly includes main production facilities, auxiliary production facilities, and public works.The project will address the downstream needs for PTA.  4. Investment rating and estimation: It is estimated that the company’s net profit attributable to the parent in 2019/20/21 will be 24 respectively.26/60.35/76.5 billion, PE is 29/12/9 times.Maintain the “Highly Recommended” rating.  5. Risk warning: The price of oil drops sharply; downstream demand is less than expected; the progress of Zhejiang Petrochemical project is not up to expectations.