Summary of Rongsheng Petrochemical Conference Call Company Overview - **Company**: Rongsheng Petrochemical - **Date**: August 25, 2025 Key Financial Performance - **Q2 2025 Revenue**: 73.7 billion CNY, with a net profit attributable to shareholders of 14 million CNY and a non-recurring net profit of 137 million CNY [2][3] - **H1 2025 Revenue**: 148.6 billion CNY, net profit of 602 million CNY, and non-recurring net profit of 755 million CNY [3] - **Refining Segment Profit**: 45.3 million CNY in H1 2025, with Zhejiang Petrochemical contributing 213.2 million CNY and Zhongjin reporting a loss of 63.4 million CNY [3] - **Oil Processing Volume**: Approximately 21 million tons in H1 2025, with a refining load rate close to 110% [2][4] Market Environment - **International Oil Prices**: Brent crude averaged 75 USD/barrel in Q1 and decreased to 67 USD/barrel in Q2 2025 [2][5] - **Domestic Coal Prices**: Decreased from 721 CNY/ton in Q1 to 632 CNY/ton in Q2 2025 [5] - **Product Sales**: Total refined oil production of approximately 7.9 million tons in H1 2025, with 1 million tons exported and over 6.9 million tons sold domestically [5] Strategic Initiatives - **Investment Structure Optimization**: Reduced capital expenditures on high-performance resins and advanced materials while exploring international cooperation opportunities [2][6] - **Technological Upgrades**: Implementation of advanced hydrocracking technology to improve efficiency and flexibility in product output [3][8] - **Global Collaboration**: Ongoing projects with Saudi Aramco to enhance downstream chemical products and increase aromatics capacity [3][9] Industry Dynamics - **Refinery Closures**: Global refinery closures and restructuring risks, with approximately 100 refineries expected to close by 2035, impacting supply dynamics [15] - **Domestic Refinery Operations**: Decrease in operating rates for domestic refineries, particularly in Shandong, due to tax policies [15] - **Regulatory Environment**: New policies aimed at eliminating outdated capacities and promoting energy efficiency, benefiting larger, more efficient firms like Rongsheng [11][12] Future Outlook - **Cost Savings from Oil Price Declines**: A projected annual savings of over 20 billion CNY for every 10 USD/barrel decrease in oil prices, with expectations of oil prices stabilizing around 65 USD/barrel [10][17] - **Market Demand Recovery**: Anticipated recovery in chemical product margins as the traditional demand season approaches in Q3 2025 [10] - **Long-term Growth Potential**: Positive outlook for Rongsheng due to high-value chemical products and strategic international expansions [23] Additional Insights - **Inventory Management**: Effective management of inventory losses due to declining oil prices, with significant improvements in profitability from upgraded facilities [8] - **Collaborative Production Cuts**: Joint production cuts in the polyester bottle segment to stabilize prices and improve margins [14] - **Global Marketing Strategy**: Development of a global marketing system to enhance export capabilities and market reach [13]

Core Viewpoint - The report from Xinda Securities indicates that Rongsheng Petrochemical experienced a significant decline in net profit for the first half of the year, with a year-on-year decrease of 29.82% to 602 million yuan, and a drastic drop of 95.52% year-on-year in Q2, amounting to 14 million yuan, alongside a 97.67% quarter-on-quarter decline [1] Group 1: Company Performance - Rongsheng Petrochemical's net profit for the first half of the year was 602 million yuan, reflecting a year-on-year decline of 29.82% [1] - In Q2, the company reported a net profit of 14 million yuan, which represents a year-on-year decrease of 95.52% and a quarter-on-quarter decline of 97.67% [1] Group 2: Industry Outlook - The aromatic hydrocarbon segment has been a drag on the company's performance, indicating that the company is under significant pressure in the current market environment [1] - The report suggests that the company, as a leading private refining entity in China, may continue to benefit from the optimization of the competitive landscape characterized by limited new capacity and the elimination of excess capacity [1] - The outlook remains positive for the company's performance elasticity in the era of stock competition in the refining industry, coupled with a continuous strengthening of shareholder returns [1]

Group 1 - The core viewpoint of the report is that the company Rongsheng Petrochemical (002493.SZ) is given a "buy" rating by Xinda Securities due to its potential despite facing challenges in the aromatics sector [1] - The company's performance in the first half of the year was significantly pressured, primarily due to the drag from the aromatics segment [1] - The report highlights the arrival of a competitive era, suggesting optimism regarding the performance elasticity of advanced private refining capacities [1] Group 2 - The report mentions several risks that could impact the company, including significant fluctuations in crude oil prices and potential delays in new capacity construction [1] - There are concerns regarding the oversupply of refining capacity and the slow recovery of downstream product profits [1] - The report also notes the increasing risks associated with "carbon neutrality" policies and the possibility of a slower-than-expected global economic recovery [1]

Group 1 - International oil prices are experiencing a downward trend due to easing geopolitical tensions and increased production by OPEC+, leading to a supply surplus [1] - The market predicts that the overall oil price will continue to decline in the second half of the year, benefiting major refining companies like Rongsheng Petrochemical, Hengli Petrochemical, and Dongfang Shenghong [1][4] - OPEC+ plans to increase oil production by 547,000 barrels per day starting in September, marking a significant policy shift towards increasing supply [1] Group 2 - Historical data indicates that as oil prices decline, the cost structure of the chemical sector improves, allowing for greater profit elasticity for private refining companies [2] - Rongsheng Petrochemical's Zhejiang Petrochemical is projected to achieve theoretical net profits of 5.3 billion, 10.7 billion, and 13.8 billion yuan at oil prices of $80, $70, and $60 respectively [2] - The Chinese government is implementing a "de-involution" policy aimed at optimizing market competition and eliminating outdated production capacity in key industries, including petrochemicals [2][3] Group 3 - The emphasis on "de-involution" is expected to lead to structural reforms in the petrochemical industry, enhancing overall industry value and profitability [3] - As part of the "de-involution" initiative, Rongsheng Petrochemical has collaborated with other leading companies to reduce production capacity and stabilize product prices [3] - The company is leveraging its integrated refining capabilities to enhance its competitive position and expand into high-value products, with an annual production capacity of nearly 60 million tons [3] Group 4 - Companies like Rongsheng Petrochemical, Hengli Petrochemical, and Dongfang Shenghong are expected to benefit from the declining cost structure and "de-involution" policies, enhancing their long-term investment value [4]

Group 1 - The domestic key refining project price difference this week is 2579 yuan/ton, an increase of 18 yuan/ton (up 1%) compared to the previous week [2] - The average prices for POY, FDY, and DTY this week are 6789, 7100, and 7986 yuan/ton respectively, with week-on-week increases of 61, 57, and 57 yuan/ton [2] - The average profit for the POY, FDY, and DTY industries this week is 35, -25, and -34 yuan/ton respectively, with week-on-week changes of +18, +16, and +16 yuan/ton [2] Group 2 - The inventory levels for POY, FDY, and DTY are 13.8, 22.7, and 27.8 days respectively, showing week-on-week decreases of 2.3, 0.6, and 0.4 days [2] - The operating rate for long filaments is 90.7%, an increase of 0.1 percentage points compared to the previous week [2] - The operating rate for weaving machines this week is 60.1%, an increase of 2.1 percentage points compared to the previous week [2] Group 3 - Domestic refined oil prices for gasoline, diesel, and aviation kerosene have decreased this week [2] - The average PX price this week is 841.1 USD/ton, an increase of 9.0 USD/ton compared to the previous week [2] - The PX operating rate is 84.6%, an increase of 1.4 percentage points compared to the previous week [2]

Investment Rating - The investment rating for Rongsheng Petrochemical is "Buy" [4] Core Views - The company's performance in the first half of 2025 was significantly pressured, with a revenue of 148.63 billion yuan, a year-on-year decrease of 7.83%, and a net profit attributable to shareholders of 600 million yuan, down 29.82% year-on-year [1][2] - The report highlights that the aromatics sector has dragged down the company's performance, primarily due to a decline in international oil prices, which averaged $71 per barrel in the first half of 2025, a 15% decrease year-on-year [4] - The report anticipates that the era of stock competition is approaching, and it is optimistic about the performance elasticity of advanced private refining capacities in the current competitive landscape [4] Financial Performance Summary - In the first half of 2025, the gross profit margins for refining products, chemical products, and polyester products were 22.6%, 12.1%, and 1.5%, respectively, with year-on-year changes of +4 percentage points, -2.6 percentage points, and +0.16 percentage points [4] - The report forecasts the company's net profit attributable to shareholders for 2025-2027 to be 1.753 billion, 2.722 billion, and 4.155 billion yuan, with year-on-year growth rates of 142.0%, 55.2%, and 52.7% respectively [4][6] - The diluted EPS for the same period is projected to be 0.18, 0.27, and 0.42 yuan per share, with corresponding P/E ratios of 57.09, 36.78, and 24.09 times [4][6]

Group 1: North Exchange Specialized and Innovative Index - The North Exchange Specialized and Innovative Index focuses on innovative small and medium-sized enterprises, emphasizing "specialized, refined, unique, and innovative" small giants, providing differentiated value as a rare high-quality small-cap growth index in the market [11][12] - The index consists of high-quality underlying assets, with a market capitalization median of 3.74 billion yuan, lower than other indices, indicating a focus on smaller companies [11] - The index has shown high growth potential, with a revenue compound annual growth rate (CAGR) of 40.4% over the past three years, and a high research and development investment ratio of 6.2% [11] Group 2: Saint Bella (2508HK) - Saint Bella is a well-known company in the high-end confinement service sector, aiming to provide comprehensive family care services from pregnancy to elderly care, with a projected adjusted net profit of 117 million, 191 million, and 287 million yuan for 2025-2027 [3][14] - The company has established four core advantages: strong brand recognition in high-end confinement services, a light asset model with standardized training, vertical and horizontal expansion in family services, and international market penetration targeting overseas Chinese [17] - The family care industry in China is expected to grow from 392.8 billion yuan in 2019 to 711.3 billion yuan in 2024, with a CAGR of 12.6%, indicating a favorable market environment for Saint Bella [17]

Investment Rating - The report maintains a positive outlook on the petrochemical industry, particularly highlighting the potential recovery in China's refining sector due to planned capacity reductions in South Korea [5][12]. Core Insights - South Korea plans to cut up to 25% of its naphtha cracking capacity, which is expected to accelerate the recovery of China's refining sector. This decision comes as South Korean petrochemical companies face significant profit declines due to increased competition from Chinese production and weak demand in recent years [5][6]. - The report indicates that the operating rates of South Korea's petrochemical industry have fallen to historically low levels, necessitating urgent measures to address the oversupply issue [5][8]. - The report emphasizes that the reduction in South Korean supply could lead to tighter imports of refined products in China, particularly aromatic products, thereby enhancing the recovery prospects for the domestic refining industry [12]. Summary by Sections Upstream Sector - Brent crude oil prices increased to $67.73 per barrel, reflecting a week-on-week growth of 2.85%. WTI prices also rose to $63.66 per barrel, up 1.37% [17]. - As of August 15, U.S. commercial crude oil inventories stood at 421 million barrels, a decrease of 6.01 million barrels from the previous week, indicating a tighter supply situation [19]. Refining Sector - The integrated margin for Singapore's refining products decreased to $12.99 per barrel, down by $2.09 from the previous week, indicating pressure on refining profitability [50]. - The report notes that while refining margins have improved slightly, they remain at low levels, with expectations for gradual recovery as economic conditions improve [5][47]. Polyester Sector - The report highlights a recovery expectation for the polyester sector, with potential upward movement in profitability as supply-demand dynamics improve. Key companies to watch include Tongkun Co. and Wankai New Materials [12]. Investment Recommendations - The report suggests focusing on leading companies in the polyester sector such as Tongkun Co. and Wankai New Materials, as well as high-quality refining companies like Hengli Petrochemical and Rongsheng Petrochemical, which are expected to benefit from improved competitive dynamics [12].

Price Trends - Domestic refining project price spread this week is 2579 CNY/ton, up by 18 CNY/ton (1%) week-on-week[2] - International refining project price spread this week is 1077 CNY/ton, down by 33 CNY/ton (-3%) week-on-week[2] Polyester Sector - Average prices for POY, FDY, and DTY are 6789, 7100, and 7986 CNY/ton respectively, with week-on-week increases of 61, 57, and 57 CNY/ton[2] - Weekly average profits for POY, FDY, and DTY are 35, -25, and -34 CNY/ton respectively, with week-on-week changes of +18, +16, and +16 CNY/ton[2] - Inventory days for POY, FDY, and DTY are 13.8, 22.7, and 27.8 days respectively, with week-on-week changes of -2.3, -0.6, and -0.4 days[2] - Operating rate for polyester filament is 90.7%, up by 0.1 percentage points week-on-week[2] Refining Sector - Domestic gasoline, diesel, and aviation fuel prices have decreased this week[2] - US aviation fuel prices have also decreased this week[2] Chemical Sector - PX average price is 841.1 USD/ton, up by 9.0 USD/ton week-on-week, with a price spread against crude oil of 353.3 USD/ton, up by 5.3 USD/ton week-on-week[2] - PX operating rate is 84.6%, up by 1.4 percentage points week-on-week[2] Risks - Project implementation progress may fall short of expectations[2] - Macroeconomic growth slowdown could lead to weaker-than-expected demand recovery[2] - Geopolitical risks may cause fluctuations in raw material prices[2] - Significant changes in industry capacity may occur[2] - Statistical discrepancies and calculation errors may arise[2]

Core Viewpoint - Rongsheng Petrochemical reported a stable overall operating condition with total assets exceeding 384.01 billion yuan, operating revenue of 148.63 billion yuan, and a net profit attributable to shareholders of 600 million yuan for the first half of 2025 [1] Group 1: Financial Performance - The company achieved total assets of 384.01 billion yuan and operating revenue of 148.63 billion yuan during the reporting period [1] - The net profit attributable to shareholders was recorded at 600 million yuan, indicating a steady financial performance [1] Group 2: Share Buyback and Stake Increase - On July 18, 2025, the company completed the first phase of share buyback, canceling 136 million shares, which accounted for 1.3440% of the total share capital before cancellation, with a total expenditure of 1.998 billion yuan [1] - The controlling shareholder, Zhejiang Rongsheng Holding Group Co., Ltd., has shown confidence in the company's future by implementing two phases of share increases from January 2024 to February 2025 [1] Group 3: Strategic Initiatives - The company is optimistic about the overall development trend of the industry, supported by years of accumulated capacity layout, technological advantages, and brand influence [1] - Rongsheng Petrochemical is responding to policy requirements by optimizing its investment structure and leveraging its global large-scale refining and chemical integration advantages to enhance efficiency and innovation [1] - The company aims to achieve high-end and differentiated products to avoid falling into "involution" style competition [1]