HLGF(SH:600346) Xinda Securities·2024-04-09 16:00Investment Rating - The investment rating for Hengli Petrochemical is "Buy" [2] Core Views - The company's operating performance has significantly improved due to the recovery in industry demand and alleviation of cost pressures, with a notable increase in net profit by 197.83% year-on-year in 2023 [2][3] - Hengli Petrochemical benefits from a synergistic industrial chain, optimizing its profit structure through a comprehensive platform integrating coal, oil, and chemicals [3] - The company is set to release additional production capacity in high-performance and high-value-added chemical new materials, which is expected to drive future earnings growth [4] - Hengli Petrochemical has reinforced shareholder returns, proposing a cash dividend of RMB 5.50 per 10 shares, amounting to RMB 3.872 billion, which is 56% of its net profit attributable to shareholders [4] - The company is projected to see a compound annual growth rate (CAGR) in net profit of 22.1%, 33.9%, and 11.7% for 2024, 2025, and 2026 respectively, with corresponding earnings per share (EPS) of RMB 1.20, 1.60, and 1.79 [4] Summary by Sections Financial Performance - In 2023, Hengli Petrochemical achieved total revenue of RMB 234.87 billion, a year-on-year increase of 5.62%, and a net profit of RMB 6.91 billion, up 197.83% [2][5] - The company's gross margin improved to 11.3% in 2023, compared to 8.2% in 2022 [5] Industry Outlook - The refining sector's profitability has significantly improved, with a reported profit of RMB 65.6 billion in 2023, a 192.3% increase year-on-year, driven by the recovery of commercial activities post-pandemic [2][3] - The chemical industry shows a mixed performance, with strong profitability in aromatics but weakness in olefins due to the real estate market downturn [3] Production Capacity and Projects - The company has successfully launched several projects, including a lithium battery separator capacity of 440 million square meters and a 300,000 tons/year adipic acid project, with more high-performance resin projects expected to come online in 2024 [4] - The projected increase in PX production capacity is expected to support profitability, as the compound growth rate for PX capacity is forecasted to be only around 4% from 2023 to 2026 [3][4]