Not Afraid Of The Epidemic, Making 3.2 Billion In The First Half Of The Year! China'S Strongest Textile Leader Achieves High Growth By Extending Industrial Chain

Rongsheng Petrochemical Co., Ltd. (hereinafter referred to as "Rongsheng petrochemical") released the semi annual report for 2020 on the evening of August 11. During the reporting period, the company realized a business income of 50.282 billion yuan, a year-on-year increase of 27.32%; the net profit attributable to shareholders of listed companies was 3.208 billion yuan, with a year-on-year increase of 206.55%.

During the reporting period, the operating income of refining products and chemical products of Rongsheng Petrochemical increased by 242.34%, mainly due to the commissioning of phase I project of Zhejiang Petrochemical Co., Ltd., and the corresponding business income increased; the operating income of polyester chip increased by about 80.71%, mainly due to the production of yishenghua bottle chip project of its subsidiary company, and the corresponding business income increased; the operating income of polyester fiber decreased by about 35%, mainly due to the epidemic situation and the decline of crude oil price As a result, the overall unit price of polyester fiber decreased; other businesses were mainly wholesale trade business, and the business income of trade business decreased by about 52.58%, which was mainly due to the fact that after the first phase of Zhejiang Petrochemical Company was put into operation, the whole sales team of the company made preparations for the products of Zhejiang Petrochemical Company and reduced the trade business. At the same time, the average price of various trade varieties also decreased by different degrees compared with the same period of last year.

During the reporting period, after the phase I project of "40 million tons / year refining and chemical integration project" of Zhejiang Petrochemical, a holding subsidiary of Rongsheng petrochemical, was put into operation, the production of each unit went smoothly, the operating load increased steadily, and the profitability gradually appeared. At present, the phase II project has entered the site implementation stage, the long-term equipment procurement has been completed, the procurement framework agreement for bulk materials has been basically completed, the equipment and materials have begun to arrive in succession, and the construction and installation have entered the peak period. It is planned to start trial operation in the fourth quarter of 2020.

Rongsheng Petrochemical said that after the first phase project of "40 million tons refining and chemical integration project" of Zhejiang Petrochemical Company was put into operation, the production of each unit was progressing smoothly, the operating load was steadily increased, and the benefit release was obvious. In the first three quarters of this year, the net profit attributable to the parent company was expected to reach 5.5 billion yuan-6 billion yuan, an increase of 197.94% - 225.03% compared with 1.846 billion yuan in the same period of last year.

According to the public information, Rongsheng Petrochemical is one of the listed companies affiliated to Zhejiang Rongsheng Holding Group Co., Ltd. its main business covers polyester polyester, PTA, PX and oil refining business. The controlling shareholder Rongsheng holding group also involves in real estate, logistics and trade industries. Rongsheng Petrochemical is one of the most powerful companies in the petroleum and petrochemical industry, ranking fourth in the A-share petroleum and petrochemical sector according to market value (the top three are PetroChina, Sinopec and Hengli petrochemical).

Chen Jianwen, an analyst at Ping An Securities, believes that the development history of Rongsheng Petrochemical is the history of the industrial chain extending to the upstream. The company's main business in the early stage was textile, and later extended to the upstream production of polyester filament. It was one of the earliest enterprises involved in polyester direct spinning projects in China. At present, Rongsheng polyester and spinning, texturing supporting projects' production scale, raw material consumption and product quality are in the forefront of domestic counterparts. In 2003, Rongsheng and Hengyi Petrochemical Co., Ltd. jointly established Zhejiang Yisheng Petrochemical Co., Ltd., specializing in PTA production. Later, Yisheng Petrochemical successively put into operation PTA production plants in Hainan and Dalian. At present, Eason is the largest PTA manufacturer in the world, accounting for more than 15% of the global PTA production capacity. In 2015, Rongsheng Petrochemical completed the Sinopec aromatics project, and by the end of 2019, the first phase of the 40 million ton refining and chemical integration project of Zhejiang Petrochemical (51% of the company's shares) was put into operation, and the industrial chain was further extended to oil refining.

According to observation, the commissioning of the 20 million ton refining and chemical integration project has completely opened Rongsheng petrochemical industry chain and made the company one of the few 20 million ton refining and chemical enterprises in China. At present, the phase II 20 million ton refining and chemical integration project is under construction, and the long-term 20 million ton refining and chemical integration project is under planning. According to the current global oil refining data, after the completion of phase II, Zhejiang Petrochemical will become the fifth largest single oil refining base in the world, with a total of 60 million tons in the third phase. After completion, Zhejiang Petrochemical will become the second largest single oil refining base in the world, second only to jamnaga refinery (62 million tons) of India's reliance.

According to the financial report, with the expansion of the business sector, the revenue of Rongsheng Petrochemical is on the upward trend as a whole. In 2015, CICC project was put into operation, which greatly increased the performance of 2016. From 2017 to 2018, the international oil price fluctuated upward, and the volume and price of PTA and polyester products increased simultaneously, and the revenue reached the peak in recent years. In 2019, the drop of oil price will drag down the decline of revenue, but the company's net profit will rise obviously when the revenue drops. One of the reasons is that part of the 20 million ton refining and chemical project of Zhejiang Petrochemical has been put into operation, and refining products have been sold.

However, after the refining and chemical projects are fully put into operation at the end of 2019, the profitability of Rongsheng petrochemical company has been greatly improved. In the first quarter of 2020, the company's net profit attributable to the parent company was 1.226 billion, with a significant increase of 102.6% over the same period of last year. It is expected that the annual performance will be more certain. The profit growth brought by capacity expansion offsets the common profit fluctuation of cyclical stocks.

Chen Jianwen judged that the continuous extension of the industrial chain and the continuous investment of new production capacity have a significant impact on the company's profit margin and investment income. The production of CICC petrochemical in 2015 and the commissioning of Zhejiang Petrochemical phase I in 2019 have a positive and significant impact on the company's sales gross profit rate, sales net interest rate, return on total assets and return on net assets. In addition to the obvious increase in the production and marketing of the new business, it is also one of the main reasons for the improvement of profitability.

According to the financial report, by the end of 2019, Rongsheng Petrochemical has formed the main production capacity distribution of 20 million tons of oil refinery + 13.5 million tons of PTA + 1.3 million tons of pet. The refinery was put into operation in December 2019, and the PTA project was basically put into operation in 2014 and before. The production capacity of filament was 940000 tons of FDY and POY, and 350000 tons of DTY. The export products were mainly FDY + DTY. In terms of scale expansion, the company plans to put into operation 20 million tons of Zhejiang Petrochemical Refinery by the end of 2020, 20 million tons of capacity of phase III refinery is still under planning, and the 6 million tons PTA project of Yisheng new materials is still under construction, and the polyester increment is relatively small.

Ren Zhiqiang, a researcher at Huachuang securities, said that in the past 10 years, Rongsheng Petrochemical's revenue scale expanded at a high speed with a compound growth rate of 18%. At the same time, Rongsheng Petrochemical increased its gross profit rate by continuously entering the upstream core profit chain, such as entering PX in 2015 and refining products in 2019. Due to the rising risk ability of integration, the bottom of gross profit rate of the company has also risen in recent 10 years. In 2020, Rongsheng Petrochemical has completed the integrated layout, growing from a textile factory to a petrochemical giant integrating upstream and downstream. In terms of refinery scale, the 40 million ton refinery capacity has made it one of the leading refineries.