Rongsheng Petrochemical: 2019 Performance Increased Compared With The Same Period Last Year

Rongsheng Formosa Petrochemical Co (hereinafter referred to as "Rongsheng petrochemical") recently released the 2019 performance bulletin. During the reporting period, the company achieved operating income of 87 billion 310 million yuan, a decrease of 4.5% over the same period last year, mainly due to a slight decrease in the current trade income of the company and a profit of 3 billion 290 million yuan, an increase of 44.63% over the same period last year, with a total profit of 3 billion 296 million yuan, an increase of 43.69% over the same period last year. The net profit attributable to shareholders of listed companies was 2 billion 222 million yuan, an increase of 38.27% over the same period last year.

Rongsheng Petrochemical explained that the main reason for the change in the performance during the reporting period was the increase in the profit of the company's PTA products compared with the same period last year. In addition, the first phase of the Zhejiang Petrochemical Project was successfully put into operation, and the petrochemical products contributed some profits. The total assets of the company were 182 billion 463 million yuan, an increase of 50.28% compared with the beginning of the year, which is mainly related to the increase in expenditure and inventory of the Zhejiang Petrochemical Company Limited under construction.

According to the insiders, although Rongsheng Petrochemical's fourth quarter performance in 2019 was lower than expected, mainly due to the fall in the price and profit of the upstream and downstream products of polyester products chain in the quarter, but fortunately, the first phase of the Zhejiang Petrochemical Project was successfully launched, and the first part of the four quarter profits were paid. This indicates that the Zhejiang Petrochemical Project has begun to consolidate and contribute to incremental performance. It is expected that the Zhejiang Petrochemical Project is expected to bring considerable performance growth to Rongsheng petrochemical in 2020.

Zhe Petrochemical's Ningbo Zhoushan port is the world's largest port of throughput, backed by the vast Yangtze River economic belt, and also the bridgehead of China's foreign trade. It enjoys Tongjiang's unique logistics advantages. Zhoushan has excellent hydrological conditions and many natural harbors. There are more than 300 thousand tons of crude oil terminals for the use of Zhejiang Petrochemical. With the development of the three base one center project in the free trade area, the necessary infrastructure facilities for oil storage, transportation and trade will be gradually improved.

In the view of Zhao Chen, an Orient Securities analyst, Zhejiang Petrochemical's expansion capacity comes from two aspects, one is the project itself's Alfa, that is, the profit advantage given by the scale and location. Based on the long period hypothesis of raw material and product historical price, we calculate that the profit center of its full load is about 12 billion higher than that of the domestic conventional refinery (not considering the effect of income tax, in which phase 6 billion 500 million), the cash flow from the bottom of the industry's net profit + depreciation is expected to exceed 20 billion (of which the first phase exceeds 10 billion); the two is that the shareholding structure is more diversified, and the shareholders are 51% respectively, and Tong Kun 20%. Juhua 20% and Zhoushan Haichang 9% (equity transfer to Saudi Amy), more participation in the east also means stronger financial strength. This is also sufficient to ensure that the industry will continue to expand its capacity in the next few years. Refining and refining profits come from the scale in essence, who can expand in the low tide, and who will gain greater profits in the recovery. Refining and chemical industry as a very heavy asset, the scale is actually fighting funds. This is just like what Lei Jun of the Internet entrepreneurial wave in the past few years said. Only when there is money to burn, can an enterprise become the last winner.

Zhao Chen said that refining and chemical industry as a highly mature technology industry, the cost difference of the production end is mainly from the scale. The larger the scale and the higher the integration level, the lower the comprehensive cost. At present, Zhejiang Petrochemical is the first integrated project of 40 million tons of integrated planning in China. The two phase project has already started. The three phase project has also been approved for approval, and the long-term scale is expected to be increased to 60 million tons. This scale is not only far ahead in China, but also in the world as a measure of refining and chemical integration. Zhejiang Petrochemical is also unique (scale only to India Xincheng, but the latter is essentially a pure refining enterprise). With regard to the potential surplus of China's refining and chemical industry, it is only a matter of time before new projects are introduced again. If there is no such a short window period like Zhejiang Petrochemical, we should take the lead in the layout. Later, we would like to get this kind of scale.

As far as location advantage is concerned, Zhejiang Petrochemical is located in Zhoushan, enjoying three advantages: policy support, industrial cluster and logistics convenience. It is one of the most suitable geomantic treasures in China to develop oil refining industry. Referring to the layout of the oil refining industry in the United States, 52% of the refineries are located in the PADD3 area and are mainly concentrated along the Gulf of Mexico. The top three refineries in the United States are located here. The core reason lies in the excellent resources and market conditions in the bay area, including the perfect import and export facilities for crude oil, the storage and transportation pipeline for oil products, the abundant supply of cheap shale oil and the consumption ability of the downstream oil and chemical products. As far as China is concerned, the refineries in coastal areas have certain advantages as crude oil is more dependent on imports. In the seven major petrochemical bases of the coastal countries, Zhao Chen believes that Zhoushan Petrochemical Corporation has three advantages: policy support, industrial cluster and logistics convenience. It is one of the most suitable geomantic treasures in China. In the future, Shanghai Yongzhou Bay area is expected to become China's largest oil refining industry base and world-class oil refining center. Zhejiang Petrochemical will benefit from it as its leader. The resulting pre tax profit advantage is about 1 billion 700 million.

Zhao Chen said, at present, the Gulf Coast refineries include 8 million tons of Daxie petrochemical, 23 million tons of Zhenhai Refining and chemical and 16 million tons of Shanghai petrochemical, and the total oil refining scale has reached 47 million tons. In the future, with the development of Zhejiang Petrochemical Company, Zhenhai Refining and chemical extension and Gaoqiao Petrochemical relocation, the oil refining production will continue to grow, and the total capacity is expected to exceed 1.1 billion tons (considering that Hangzhou Petrochemical three will break through 130 million). The Shanghai Yongzhou Bay area will form the largest petrochemical industrial cluster in China.

From the perspective of a single refinery, Zhejiang Petrochemical and Zhenhai Refining and chemical production line scale, advanced equipment and product richness are also the industry leaders. As a model of high value-added refineries, they have strong global comparative advantages. In addition to several major refining projects, the Shanghai Yongzhou Bay area also includes three major petrochemical and chemical industrial parks, including Shanghai chemical industry zone, Ningbo Petrochemical Economic and Technological Development Zone, and Ningbo Daxie Development Zone, including BASF, NVDA, LG Yongxing, Wanhua chemical and many other chemical leading enterprises. In the future, the Shanghai Yongzhou Bay area is expected to form a trillions of petrochemical industrial clusters that combine vertical refining and vertical integration of refinery, petrochemical and fine chemicals, and build a new global refining and chemical center which is shoulder to shoulder in the US Gulf of Mexico and Ludwigshafen, Germany.

Public information shows that Rongsheng Petrochemical deep ploughing Petrochemical Fiber field, after years of development, the company has formed "fuel oil, naphtha aromatic polyester spinning spinning" integrated industrial chain, currently has aromatics 2 million tons, PTA1350 million tons (about 6 million tons / year), polyesters of more than 3 million tons, 1 million 300 thousand tons of spinning, 400 thousand tons of annual production capacity, Zhejiang Petrochemical is one-time. The large scale refining and chemical integration project invested by greenbelt is the fifth largest oil refinery in the world after being put into operation.