DQHK(SZ:000985) Minsheng Securities·2024-09-19 13:00Investment Rating - The report initiates coverage with a "Cautious Recommendation" rating for the company [4]. Core Views - The company is a rare entity in China focusing on deep processing of C5 and C9 resources, primarily relying on the ethylene cracking unit of Daqing Petrochemical [2][7]. - The company has experienced a significant decline in sales revenue in 2023, with a 23.34% year-on-year decrease, amounting to 2 billion yuan, and a net profit drop of 63.16% to 5.68 million yuan. However, in the first half of 2024, sales revenue showed a smaller decline of 13.26% to 968 million yuan, with a remarkable net profit increase of 5432.29% to 8.02 million yuan [2][8]. - The company benefits from a stable raw material supply due to its affiliation with China National Petroleum Corporation, which enhances its long-term resource advantages [2][33]. - The company is actively developing new products and optimizing existing facilities to enhance competitiveness within the industry [2][3]. - Management reforms have led to a significant reduction in workforce and improved efficiency, with the number of employees decreasing from 633 in 2019 to 469 in 2023, a reduction of 26% [2][3]. Summary by Sections Company Overview - The company is a subsidiary of China National Petroleum Corporation, focusing on deep processing of refining by-products [5][7]. - It operates primarily with the C5 and C9 fractions derived from a 1.2 million-ton ethylene cracking unit [7][14]. Raw Material Supply and Industry Dynamics - The lightening of cracking raw materials may tighten the supply of C5 and C9 resources, but the company maintains a stable supply due to its parent company's support [2][33]. - The theoretical supply satisfaction rate for C5 is projected to decline from 102.7% in 2023 to 95.6% by 2026, while C9 is expected to decrease from 118.8% to 110.6% in the same period [2]. Product Development and Operational Efficiency - The company is focusing on developing high-value-added products and optimizing existing production facilities to enhance its market position [2][3]. - New product developments include high-softening-point C5 resins and isoprene-modified DCPD resins, which are expected to positively impact performance [2]. Financial Forecast - The company forecasts net profits of 27 million yuan, 85 million yuan, and 148 million yuan for 2024, 2025, and 2026, respectively, with corresponding EPS of 0.21, 0.66, and 1.14 yuan [2][3]. - The current price corresponds to a PE ratio of 66x for 2024, 21x for 2025, and 12x for 2026, indicating a favorable growth outlook [2][3].