Rongsheng Petrochemical Fell Sharply In The First Half Of The Year, To Develop The Industrial Chain Upstream.

Events:

In the first half of 2012, the company achieved a total revenue of 11 billion 454 million yuan, an increase of 6.51% over the same period last year.

For 263 million yuan, a year-on-year decrease of 83.8%, the net profit attributable to the parent company's owners was 238 million yuan, down 77.2% from the same period last year.

Diluted earnings per share (yuan) 0.21, down 77.66% over the same period last year.

Sales gross margin 2.3%, sales net interest rate 2.08%.

Main points of investment:

In the first half of the year, profits fell sharply compared with the same period last year. The income in the first half of the year increased by 6.51% compared with the same period last year. Net profit attributable to shareholders of listed companies decreased by 77.2% compared with the same period last year, and the earnings per share were 0.21 yuan.

In the current period, the company realized operating profit of 263 million yuan, down 83.8% compared with the same period last year.

In the first half of this year, there were unfavorable factors such as the growth of demand for international chemical fiber market, the slow growth of domestic chemical fiber market demand, the aggravation of price fluctuation of raw material and commodity futures, and so on, which made the price of the company's products decline, production and sales decreased, and the efficiency declined considerably compared with the same period last year.

The price of PTA fell, and the slowdown in downstream demand led to a sharp drop in profits. As the European debt crisis continued, crude oil prices fell and market expectations for the rapid release of PTA and polyester fiber production capacity, during the reporting period, the price of PTA decreased significantly. The average price in the first half of the year was only 8534 yuan / ton.

And the company needs to maintain certain raw materials and products turnover inventory, the sharp decline in industrial chain prices also led to high inventory losses.

In the first half of the year, PTA business cost increased by 60.47% compared with the same period last year, and gross profit margin fell by 16.13% compared with the same period last year.

PTA is the main product of the company. In 2011, it accounted for 49% of the company's revenue.

In addition, affected by the domestic macro-economic and market environment, the demand for textile, clothing and other industries in the lower reaches has slowed down.

2012 1-7 month

Clothing exports totaled 137 billion 401 million US dollars, down 0.21% compared to the same period last year.

In terms of domestic sales, the growth rate of garment retail sales slowed sharply compared with the same period last year, and the sales of consumer goods market fell into a downturn.

In the first half of the year, polyester chip business income fell 29.9% year-on-year, basically in the balance of profits and losses; Dacron plus silk business income decreased 25.56% compared with the same period last year, gross profit margin fell 9.27% compared with the same period last year.

The weak demand for the downstream makes the overall performance of the company decline.

Expansion of main business capacity, expansion of upstream and downstream products is expected to improve profitability.

The company's PTA business expanded by 750 thousand tons in the second half of last year, PTA capacity increased to 2 million 250 thousand tons, 11 annual sales volume of about 2 million tons.

At the same time, a new capacity of 3 million tons PTA is being built, and it is expected to be put into operation as soon as possible by the end of this year or early next year.

By then, the company will become the largest PTA producer in China, and will bring certain scale advantages to the company.

At present, although the gross profit of PTA is low, the operating rate is normal.

Recently, crude oil prices have risen, PTA prices have been rising, and the market has picked up slightly. At the same time, with the coming of the peak season of autumn and winter clothing production in the second half of this year, the demand for polyester is expected to increase, and the market in the second half of this year is expected to improve.

The company has been hoping to expand to the upper reaches of PTA, and is currently preparing for a 700 thousand ton PX project, which will enhance the self-sufficiency capability of PTA raw materials.

In addition, the company invested more than 796 million yuan in the capital raising project "Shengyuan chemical fiber annual output of 100 thousand tons of fine denier differential FDY wire and 30 thousand tons of fine denier differential DTY wire technology pformation project". The construction of the project has already started, and the construction period is expected to be two years, and is expected to be completed in November 2013.

After the 290 thousand tons of differentiated filament project was put into operation, new products such as flame retardant, environmental protection and ultra fine denier were added. The differentiation rate of filament yarn was further improved, and the competitiveness and profitability of the products could be effectively improved.

Profit forecast and investment analysis

We believe that the domestic textile and garment industry is still in the doldrums, and the possibility of overcapacity in the PTA market is relatively large, which has a negative impact on the profitability of the main business of the company.

However, as the leading enterprises in the domestic polyester industry chain, coupled with the new PTA production capacity, when the downstream demand rebounded, the company's performance will have much room for improvement.

To sum up, we estimate that the 2012-2014 years EPS of Rongsheng Petrochemical Company is 0.61 yuan, 1.14 yuan and 1.56 yuan respectively. The current stock price corresponds to the P/E value of EPS in 2012, which is 20.66 times, 11.11 times and 8.10 times, respectively. The corresponding P/B value is 1.94 times, 1.70 times, 1.46 times, and is given "overweight" rating.

Risk hints

Downstream textile

The risk of continuous downturn in industry demand; PX project policy risk; in construction projects can not be completed as scheduled; safety production risk.