event overview:

on September 12, 2023, the company announced that Lianyungang petrochemical, a wholly-owned subsidiary of satellite chemistry, intends to acquire 100 equity of Jiangsu jiahong new materials co., ltd. held by satellite holdings and kunyuan investment in cash, with a transaction amount of 1.524 billion yuan.

analysis and judgment:

further improve the product matrix to form complementary propylene oxide and ethylene oxide

according to the company's announcement, jiahong new materials is the specific implementation company that signed the cooperation agreement on investment projects in xuwei new area between satellite holding and the management committee of the national east, central and west regional cooperation demonstration area (Lianyungang xuwei new area) on December 27, 2020, the agreement promises to build 900000 tons of olefin raw materials processing and downstream HPPO, acrylonitrile, ABS, acrylamide and other high-performance materials industry chain projects and related public and auxiliary facilities. Jiahong New Material has now built 3 sets of 450000-ton/year HP units, 1 set of 400000-ton/year PO units, 220KV total drop, elevated torch, supporting storage and public works and other supporting facilities. After the completion of the transaction, it can further give full play to the advantages of the company's industrial chain integration, reduce related transactions between controlling shareholders and listed companies, and avoid potential horizontal competition; it is conducive to promoting the implementation of the company's overall strategic planning, improving the product structure of the company's C3 industrial chain, and forming the complementary products of propylene oxide and ethylene oxide, Extend the downstream epoxy derivative high-end chemical industry chain.

acrylic acid, butyl acrylate market recovery, the company's profit improvement trend to determine

with the improvement of the internal and external environment and the arrival of the peak season demand recovery, acrylic acid and butyl acrylate market gradually returned to activity, product prices gradually increased, inventory decline. Baichuan Yingfu data show that in August 2023, the average price of acrylic/acrylic butyl ester market was 6076.09/ 9363.04 yuan/ton, month-on-month, 1.75/11.12%, the operating rate was 62.71/57.94%, month-on-month, 16.76/9.65pct. As of September 14, 2023, the average price of acrylic acid/butyl acrylate was 6625/10900 yuan/ton, up 9.03/16.41 percent from the average price in August, with a significant increase. As of September 8, 2023, domestic factories had 2955 tons of butyl acrylate in stock, + 2% month-on-month; Acrylic acid 5381 tons, +1.09 month-on-month. According to Baichuan Yingfu data, as of September 14, 2023, propylene-propane/butyl acrylate-acrylic acid/polypropylene-propylene spread of +1589/+576/+940 yuan, compared with the August average monthly difference of +9.53%/+37.84%/+15.82%, the spread gradually widened. According to Baichuan data, as of the end of 2022, the company has an acrylic acid production capacity of 660000 tons/year, acrylic butyl production capacity of 620000 tons/year, are ranked first in the country, in the absolute leading position. We believe that with the gradual recovery of market demand, the company's main product spreads are expected to continue to expand, enhance the company's performance flexibility.

code new polymer materials business, build high-end materials industrial park

the company is committed to accelerating the development of high-end new materials, continue to enhance competitiveness. In the first half of 2023, the company's independent research and development of the annual output of 1,000 tons of alpha-olefin industrial test device a successful start-up, POE device to speed up, have achieved new stage results, for the follow-up to accelerate the annual output of 100000 tons of industrial plant construction to lay the foundation. The company increased the layout of polymer new materials business, June 19, 2023, the company announced that it intends to build alpha-olefin comprehensive utilization of high-end new materials industrial park in Lianyungang. The construction contents mainly include 2.5 million tons/year α-olefin light hydrocarbon supporting raw material unit, 5 sets of 100000 tons/year α-olefin unit, 3 sets of 200000 tons/year POE unit, 2 sets of 500000 tons/year high-end polyethylene (metallocene), 2 sets of 400000 tons/year PVC comprehensive utilization and supporting unit, 15000 tons/year poly α-olefin unit, 50000 tons/year ultra-high molecular weight polyethylene unit, etc., the total investment is about 25.7 billion yuan. The company's proposed acquisition of Jiahong new material has now built 3 sets of 450000 tons/year HP device, 1 set of 400000 tons/year PO device, as the company in the polymer new materials business continue to exert efforts, will continue to expand the growth space.

investment suggestion

due to changes in the company's product structure and raw material prices, we adjusted our previous profit forecast. we expect the company's operating income from 2023 to 2025 to be 437.55/502.83/57.13 billion yuan respectively (previously 27.444 billion yuan in 2023) and the net profit attributable to the parent to be 47.27/64.03/7.832 billion yuan respectively (previously 5.54 billion yuan in 2023). due to changes in share capital, EPS is 1.40/1.90/2.32 yuan (previously 4.51 yuan in 2023), corresponding to the closing price of 15.61 yuan on September 14, 2023 PE is 11/8/7 times. As the leader of the light hydrocarbon industry chain, the company's production capacity is in a leading position in China. With the gradual recovery of product prices and the decline of raw material prices, the company's performance is expected to continue to recover; at the same time, the new material project will provide new volume for the company's performance and maintain the "overweight" rating.

Risk Tips

Downstream demand is less than expected, project progress is less than expected, and the proposed acquisition is less than expected.