Analysis on performance of listed polyester companies in H1 2024

In the first half of 2024, the prices of most products in polyester industry chain largely increased year-on-year, with different price differences.

Rongsheng Petrochemical: recovering performance, with net profit turning to be during postive territory from negative territory

Rongsheng Petrochemical released the semi-annual report for 2024 on August 27, 2024. In 2024 H1, the company realized operating income of 161.250 billion Yuan, with a year-on-year increase of 4.35%, and net profit of 858 million yuan, with a year-on-year rise of 176.15%. Seen from the net profit of half a year, the profitability of Rongsheng Petrochemical recovered, reversing the year-on-year decline trend of net profit compared with the same period in 2022 and 2023.

By sector, the refining and chemical sector was significantly repaired in the first half of the year on a year-on-year basis. Zhejiang Petrochemical (Rongsheng Petrochemical accounted for 51% of the equity of Zhejiang Petrochemical) realized a net profit of 2.030 billion yuan, with a year-on-year growth of 3.782 billion yuan, including 18.57% gross profit rate of refining products,up 1.1% year-on-year, 14.72% gross profit rate of chemical products,up 7.0% year-on-year, and the profitability of chemical sector was significantly improved.

However, it should be noted that, by quarter, Zhejiang Petrochemical Company realized net profit of 775 million Yuan in Q2 2024, with a year-on-year decrease of 3.96% and a month-on-month decrease of 38.18%. This indicated that the recovery of end-user demand was limited, the price difference of chemicals was still in the grinding stage, and the sustainability of benefit recovery was limited. As for polyester sector, the company's polyester industry chain profit declined in the first half of the year, among which PTA product gross profit margin was -1.14%, a year-on-year decrease of 1.3, the gross profit margin of polyester chemical fiber film gross was 1.34%, a year-on-year decrease of 2.0%.

Hengli Petrochemical: recovery of performance, highest net profit still stands alone

On August 21, Hengli Petrochemical released the semi-annual report of 2024, realizing revenue of 112.596 billion yuan,up 2.87% year-on-year, and net profit of 4.018 billion yuan, up 31.77% year-on-year. Q2 realized revenue of 54.184 billion yuan in the first quarter, up 1.65%year-on-year and down 7.24% quarter on quarter; the net profit of parent company was 1.878 billion yuan, down 7.44% year-on-year and 12.20% quarter on quarter respectively. Seen from the net profit of half a year, Hengli Petrochemical's earning ability recovered. Compared with the same period of 2022 and 2023, it reversed the trend of year-on-year decline in net profit, and the net profit was the highest among the peers, which was still outstanding.

By sector, 2024 H1 refining and chemical products realized revenue of 45.997 billion yuan, year-on-year down 27%, sales volume of -24% year-on-year to 8.5503 million tons, price of -2.97% year-on-year to 5379.55 yuan/ton; PTA realized revenue of 38.732 billion yuan, with year-on-year rise of 35%, sales volume of 30% year-on-year growth to 7.345 million tons, and price of 3.8% year-on-year increase to 5273.21 yuan/ton; New material products achieved revenue of 21.062 billion yuan,up 41% year-on-year, sales volume rose 47% year-on-year to 2.599 million tons, and prices declined by 4.07% year-on-year to 8103.95 yuan/mt. At the cost end, the average purchase price of coal in H1 2024 was 710 yuan/mt, a year-on-year decrease of 19.9%, and the average purchase price of crude oil was 4323yuan/mt, a slight increase of 5.5% year-on-year.

It should be noted that, as the third largest main business of Hengli Petrochemical, polyester new material plate, the new material business grew rapidly in the first half of the year, and the contribution has reached nearly 20% of revenue. New material products include polyester new materials, engineering plastics, functional films and degradable new materials, etc.

In recent years, Hengli Petrochemical hopes that Kanghui New Material can support its business development. According to public information, in terms of high-performance engineering plastics, Kanghui New Material has an annual capacity of 660,000 tons of PBT engineering plastics. It is the largest PBT manufacturer in China, mainly used in automobile parts, polymer alloys, optical cable protective sleeves, electronic appliances and other industrial fields. In terms of biodegradable materials, Kanghui New Material has the largest annual capacity of 33,000 tons of PBAT based on independent technology in China, which is applied to green environmental protection applications such as PBS/PBAT food-grade shopping bags, tableware and straw; In terms of polyester film, Kanghui New Material has an annual capacity of 386,000 tons of BOPET, and another 970,000 tons/year of functional polyester film and 1.94 billion square meters/year of lithium battery diaphragm are gradually constructed and put into operation. However, although the revenue of new polyester materials has increased significantly, the profit growth rate has slowed down significantly. In recent two years, the capacity of PBT, PBAT and polyester film industries has expanded significantly, resulting in a sharp decline in profits in the industry.

In addition, the profit caliber of the first quarter of 2024 Q2 narrowed year-on-year and quarter-on-quarter, mainly due to the maintenance of some refining and chemical units by the company, which had a certain impact on the production, marketing and profit of the second quarter. The output change of refining and chemical products/PTA/new materials in the second quarter was -15.6%, -5.8% and +2.8% on the quarter respectively, and the sales volume change was -27% +0.9% and +22% quarter-on-quarter.

For peers of other private refining and chemical enterprises, Hengli Refining & Chemical Co., Ltd. has good profitability, and the proportion of aromatics and MTBE products is higher than that of peers. In the first half of the year, the good benefits of aromatics and MTBE products contributed greatly to the overall profit of the company, while the proportion of olefins was relatively low, which had little drag on the overall profit of the company. In addition, Hengli Refining and Chemical Co., Ltd. has its own power plant with low power consumption cost.

Eastern Shenghong: Net profit fell sharply year-on-year for three consecutive quarters

Eastern Shenghong (000301) disclosed its semi-annual report on August 29. In the first half of the year, the company realized operating income of 72.834 billion yuan, with a year-on-year growth of 10.46%; net profit of 319 million yuan, down 81.59% year-on-year; basic earnings per share of 0.05 yuan. Among them, in the second quarter of 2024, the main business income of the company in a single quarter was 36.095 billion Yuan, with a year-on-year decrease of 0.8%; the net profit of the parent company in a single quarter was 71.6861 million Yuan, with a year-on-year decrease of 92.78%;

From the single quarter to see, the company's net profit has been three consecutive quarters of a year-on-year sharp decline. In the fourth quarter of 2023 and the first quarter of 2024, the net profit attributable to Eastern Shenghong decreased by 82.31% and 66.53% respectively on a year-on-year basis.

For the reasons for the sharp decline in performance, Eastern Shenghong said in the announcement that in the first half of 2024, due to the fluctuation of crude oil market price, insufficient downstream demand of petrochemical industry and other multiple factors, the price difference of the company's main products narrowed, resulting in a year-on-year decline in operating performance.

The peak of Eastern Shenghong's performance occurred in 2021, when the company's net profit jumped fivefold year-on-year to an astonishing 4.575 billion Yuan. This was directly related to the acquisition of Sierbang with 14.36 billion Yuan in that year. After calculation, about 80% of the net profit of Eastern Shenghong's parent in that year came from Sierbang. Sierbang is the largest EVA manufacturer in China, and its core product is photovoltaic grade EVA adhesive film. Through merger and acquisition of Eastern Shenghong, Sierbang has become the largest photovoltaic grade EVA manufacturer in China. However, with insufficient demand support in photovoltaic industry, EVA price has been declining continuously recently. EVA price dropped from 29,000yuan/mt in 2021 to 10,000yuan/mt in the first half of the year, and its contribution to profit was also gradually decreasing.

Hengyi Petrochemical: The growth rate of net profit in the first half of the year was high, but the year-on-year and quarter-on-quarter decline in the second quarter was significant

On August 23,2024, Hengyi Petrochemical released the semi-annual report of 2024. In the first half year of 2024, the company realized operating income of 64.764 billion Yuan, with a year-on-year growth of 0.70%; net profit of parent company of 430 million Yuan, with a year-on-year growth of 465.59%; basic earnings per share of 0.13 Yuan, with a year-on-year growth of 550.00%. Among them, in the second quarter, the company realized operating income of 33.109 billion Yuan, with a year-on-year decrease of 7.87% and a quarter-on-quarter growth of 4.59%; the net profit of parent company was 17 million yuan, with a year-on-year decrease of 59.69% and a quarter-on-quarter decrease of 95.98%.

In terms of price difference of refined oil products, in the first half of 2024, the price difference of gasoline, diesel and aviation fuel in Southeast Asia was USD 11, 19 and 17/barrel respectively, with a year-on-year decrease of 13%, 11% and 12%, among which the price difference in the second quarter decreased by 32%,34% and 35% quarter on quarter. In the first half of 2024, the price difference of refined oil products in Southeast Asia narrowed, among which the narrowing in the second quarter was obvious.

In terms of chemicals, in the first half of 2024, the aromatic hydrocarbon plate as a whole maintained a relatively high prosperity, contributing greatly to the company's profits. In the first half year, the price difference of benzene and PX was 49% and-5% respectively on a year-on-year basis, among which the price difference change in the second quarter was 15% and -3% quarter on quarter respectively. The supply and demand of aromatics remained tight, especially the benzene unit gradually entered the centralized maintenance period in the first half year, the tight supply pattern intensified, and the price difference rose sharply, while the price spread of PX declined slightly due to the recovery of supply.

As for polyester filament yarn, the profit of polyester filament industry in the first half of 2024 was lower than market expectations. Although the new capacity of polyester filament yarn is relatively small this year, only 1.16 million tons, with a growth rate of less than 2%. However, due to good market expectations before the Spring Festival, the operating rate of the industry remained high before and after the Spring Festival, resulting in great pressure on filament inventory in the first half of 2024. According to the statistics of CCFGroup, the operating rate of polyester filament yarn plants rose by 20 percentage points on the year in the first half of 2024, slanting high in recent decade. The growth rate of production was as high as 20%. At the same time, the growth rate of downstream orders was less than that of upstream output, dragging down the recovery range of filament yarn benefits.

Tongkun: the largest growth rate of net profit, recovery of main business of polyester filament yarn

Tongkun released the semi-annual report of 2024 on August 28. In the first half year, the company realized operating income of 48.215 billion yuan, with a year-on-year growth of 30.67%; the net profit attributable to shareholders of listed companies was 1.065 billion yuan, with a year-on-year growth of 911.35%; and the basic earnings per share was 0.45 yuan.

The company accounts for 20% of the equity of Zhejiang Petrochemical Company. In the first half of 2024, the profit attributable to shareholders of listed companies deducting investment income of associates and joint ventures was 659 million yuan, up 44.84% year-on-year, indicating that the performance of polyester main business of the company increased significantly in the first half year.

Tongkun has a capacity of 13 million tons of polyester filament yarn, supporting 9.7 million tons of PTA. According to statistics from CCFGroup, the price difference of PTA in the first of 2024 was 348yuan/mt, the industry continued to be in a loss, and the company was expected to be still in a loss state, while the price difference of polyester filament yarn POY was 1162 yuan/ton, the average profit of the industry was 62 yuan/ton, while the company has a cost superior to the average of the industry, and the estimated profit per ton was around 150-200yuan/mt.

The company's actual operating income in Q2 2024 was 27.103 billion yuan, and the net profit of parent company was 485 million Yuan. Excluding the investment income contributed by Zhejiang Petrochemical, the company's Q2 polyester main business realized a profit of 330 million yuan, which was basically the same as that of Q1.

Xinfengming: PTA + polyester filament yarn had the strongest cost competitiveness and the profit level was superior to that of the same industry

Xinfengming (603225) disclosed its semi-annual report on August 28. In the first half of 2024, it realized operating income of 31.272 billion Yuan, with a year-on-year growth of 10.96%; net profit of 605 million Yuan, with a year-on-year growth of 26.17%. During the reporting period, the price difference of the Company's products increased compared with the same period of last year, and the overall profitability was enhanced.

Xinfengming has a capacity of 7.4 million tons/year of polyester filament yarn, 1.2 million tons of staple fiber and 5 million tons of PTA. According to different products, the company's PTA profit in the first half of 2024 was 28 million tons, and the loss of staple fiber was 60 million yuan, while the actual profit of filament reached 644 million yuan. Compared with Tongkun's 13 million tons of filament +9.7 million tons of PTA, the profit of the first half year was 659 million yuan, and the profit of Xinfengming in PTA and filament yarn per ton was higher than that of the same industry.

In Q2, the company's revenue and profit increased significantly quarter on quarter, realizing revenue of 16.820 billion yuan, with year-on-year/quarter-on-quarter change of 7.32% and 16.38%; net profit of parent company of 329 million yuan, with year-on-year/quarter-on-quarter change of 13.70% and 19.73%. As leading companies curbed price from falling in the later period of Q2, whether filament yarn or staple fiber spread repair was obvious, while production and marketing was better than the first quarter.