BAOFENG ENERGY(SH:600989) HTSC·2025-08-22 07:53Investment Rating - The report maintains a "Buy" rating for Baofeng Energy [6][4]. Core Views - Baofeng Energy's revenue for the first half of 2025 reached 22.8 billion RMB, a year-on-year increase of 35%, with a net profit attributable to shareholders of 5.7 billion RMB, up 73% year-on-year [1][6]. - The company's profit exceeded expectations due to a 4.5 billion RMB investment gain from selling a 40% stake in Hongdunzi Coal Industry [1][6]. - The Inner Mongolia project is expected to continue contributing to the company's cost advantages in coal-to-olefins production [1][4]. Summary by Sections Financial Performance - In Q2 2025, the net profit attributable to shareholders was 3.28 billion RMB, a 74% increase year-on-year and a 35% increase quarter-on-quarter [1][2]. - The company reported a comprehensive gross margin improvement of 3.1 percentage points to 36.7% in the first half of 2025 [2][3]. Production and Sales - The sales volume of polyethylene and polypropylene increased by 101% and 95% year-on-year, reaching 1.15 million tons and 1.12 million tons, respectively [2][3]. - The sales revenue for polyethylene and polypropylene also saw significant increases of 90% and 88% year-on-year, amounting to 7.8 billion RMB and 7.2 billion RMB, respectively [2][3]. Market Outlook - The report anticipates a recovery in the olefins market, supported by improved downstream demand and an optimized supply structure [3][4]. - The company plans to distribute an interim dividend of 0.28 RMB per share, totaling 2.04 billion RMB, which represents 36% of the net profit for the first half of 2025 [3][4]. Profit Forecast and Valuation - The profit forecast for Baofeng Energy has been adjusted upwards, with expected net profits of 12.1 billion RMB, 12.7 billion RMB, and 13.7 billion RMB for 2025, 2026, and 2027, respectively [4][9]. - The target price for the stock is set at 22.96 RMB, reflecting a price-to-earnings ratio of 14 times for 2025 [4][6].