BAOFENG ENERGY(SH:600989) Ubs Securities·2024-08-14 03:07Investment Rating - The investment rating for the company is "Buy" with a target price of Rmb 24.00, down from Rmb 24.50 [5][6]. Core Insights - The company reported a 33% quarter-on-quarter increase in net profit for Q2, driven by improved coal-to-olefins price spreads and increased production of EVA [2][3]. - The Inner Mongolia olefins project is on track for production in Q4, with the first unit expected to start in October [4]. Financial Performance - The company achieved a revenue of Rmb 16.9 billion in the first half of the year, a 29% year-on-year increase, and a net profit of Rmb 3.3 billion, a 46% year-on-year increase [2]. - In Q2 alone, revenue reached Rmb 8.67 billion, reflecting a 36% year-on-year increase and a 5% quarter-on-quarter increase, while net profit was Rmb 1.88 billion, up 76% year-on-year and 33% quarter-on-quarter [2][3]. Product Performance - For Q2, polyethylene production and sales volumes decreased by 2% and 5% respectively, while polypropylene production and sales volumes increased by 10% and 14% respectively [3]. - The price spread for coal-based polyethylene and polypropylene improved by 13% and 15% respectively due to a decrease in coal prices [3]. Project Updates - The Inner Mongolia 3 million tons olefins project is progressing as planned, with 32% of the construction completed as of the half-year report [4]. - The first olefins unit is scheduled to be operational in October, with subsequent units expected to start in November and December [4]. Valuation - The target price has been adjusted to Rmb 24.00 per share based on a DCF valuation method, maintaining a WACC of 8.6% [5]. - The valuation corresponds to a PE ratio of 22x for 2024 and 12x for 2025 [5].