On October 26, Baofeng Energy released its third quarterly report for 2020. From January to September 2020, the company achieved operating income of 11.299 billion yuan, a year-on-year increase of 15.93%. The net profit attributable to shareholders of listed companies was 3.152 billion yuan, a year-on-year increase of 11.27% , Earnings per share is 0.4300 yuan.
Affected by Baofeng Energy’s third-quarter financial report, on October 26, Baofeng Energy’s A-share share price rose 0.84% along the market. As of the close of the day, Baofeng Energy’s share price was 10.90 yuan. As of press time, Baofeng Energy's share price was reported at 10.72 Hong Kong dollars, with a total market value of 78.614 billion yuan.
It can be seen that the capital market is still relatively optimistic about the long-term value of Baofeng Energy. Based on the core data analysis of this financial report, can we dig out some new value points? In the highly competitive market environment, what are the current financial statements of Baofeng Energy that are worthy of recognition or insufficiency?
How does the net profit and revenue of Qifei Baofeng Energy grow against the trend under the epidemic?
Founded in 2005, Baofeng Energy's main business is coal-to-olefins, and its main products are polyethylene, polypropylene and coking products. The main downstream customers of polyethylene are companies in the field of film and injection products; the main downstream customers of polypropylene are companies such as food packaging, wire and cable; the main customers of coking products are steel companies and other smelting companies. The company's operating income in the first three quarters of 2020 increased by 15.93% year-on-year.
In terms of net profit, the company's chemical products industry has disclosed that the average operating income growth rate of the three quarterly reports of individual stocks is 3.95%, and the average net profit growth rate is 4.64%. It can be said that both revenue and net profit have been achieved. So why can Baofeng Energy still achieve strong growth under the epidemic?
1. The demand and price of main polyolefin products ushered in a rebound. Although this year’s epidemic has had a certain impact on the entire industry, Baofeng Energy also responds accordingly. According to market and customer needs, Baofeng Energy has developed 6 new grades of polyethylene and polypropylene, such as S2040, which can be used in the production of masks. The products have increased efficiency. 84.6 million yuan. In addition, Baofeng Energy has also completed the technical reserves of 7 new brands such as K4912, water supply pipe material PE-100, which are used to produce medical products such as medical syringes.
As a basic raw material widely used in production and life, polyolefin products never lack the market. Flush data shows that the spot price of polyethylene has risen from a low of 6000 yuan/ton during the year to 7550 yuan/ton, and polypropylene spot price The price rose to 8,150 yuan per ton from the low of 6316.67 yuan/ton during the year.
2. Coal-based polyolefins are relatively low-cost and have broad room for growth. According to data from Longzhong Information, coal-to-olefin refers to the production of methanol from coal, coke, and coke oven gas, and polyethylene and polypropylene produced from methanol as raw materials. From the perspective of the comprehensive cost of polyolefins from 2015 to 2019 , The oil-based system is the highest, followed by the gas-based system, and the coal-based system has long maintained a low cost. This also makes Baofeng Energy's gross profit margin as high as 40%. Due to my country's coal-rich and oil-poor resource attributes, the growth space of coal-to-olefin production capacity is the broadest.
Baofeng Energy's main products have a low market share and rapid expansion is still risky
The third quarter report shows that during the reporting period, the company's operating costs in the third quarter of 2020 were 6.48 billion, a year-on-year increase of 19.9%, which was higher than the 15.9% growth rate of operating income, resulting in a 1.9% drop in gross profit margin.
Benefiting from factors such as the increase in fixed assets and monetary funds, the company's total assets reached 36.689 billion yuan, an increase of 10.19% over the end of the previous year. During the reporting period, the company’s assets and liabilities were reasonable, and the period expense ratio was 8.3%, which was a decrease of 1.6% from last year. Expense control was reasonable. Operating cash flow increased significantly by 57.8% to 3.71 billion.
However, in the face of the complex and changeable market environment this year, Baofeng Energy is still aggressive in terms of production capacity, product types, and industrial layout.
1. Accelerate capacity expansion. In September of this year, Baofeng Energy’s 500,000 tons/year coal-to-olefin project officially started construction at Ningdong Energy and Chemical Base in Ningxia. The project includes a high-end capacity of 250,000 tons/year EVA, and Baofeng Energy’s 500,000 tons/year C2- The C5 comprehensive utilization of olefins project has obtained environmental assessment approval. After the completion of these two projects, the company's annual production capacity of polyolefins has almost doubled. The increase in cost and scale advantages has further boosted revenue capabilities, but this has also increased potential risks.
2. The main coal-to-olefin market share is not high. At present, the concentration of coal-to-olefins industry is relatively scattered, and its regionality is obvious. Taking 2016 as an example, Baofeng Energy's polyethylene and polypropylene, the leading companies in the industry, accounted for 2.13% and 1.61% of the national market respectively, and their market share was not high. Moreover, my country's over-reliance on these two basic raw materials import. Essence Securities analyst Zhang Wangqiang said that my country's import dependence on polyethylene and polypropylene was 49.0% and 13.1% respectively in 2019.
3. The valuation is too high. One thing that Baofeng Energy has been criticized for is that it is overvalued. The current price-book ratio of Baofeng Energy is 3.38 times, while the price-book ratios of peers China Shenhua (601088.SH) and China Coal Energy (601898.SH) are 0.96 times and 0.55 times, respectively, with an average of 0.76 times. Baofeng Energy The price-to-book ratio is 4 times the average of the other two companies.
In terms of price-earnings ratio, Baofeng Energy has a price-earnings ratio of 24.7 times. The P/E ratios of China Shenhua (601088.SH) and China Coal Energy (601898.SH) are 8.4 times and 13 times respectively, with an average of 10.7 times. The P/E ratio reflects the level of profitability of a listed company. The lower the P/E ratio, it proves this. The stronger the company’s ability to make money. The high P/E ratio of Baofeng Energy is also the heart of Nanan Capital.
Baofeng Energy's financial report is good, but the problem still cannot be ignored
Baofeng Energy is one of the first backbone enterprises to settle in Ningdong Energy and Chemical Base. Since Baofeng Energy's listing on the main board of the Shanghai Stock Exchange on May 16, 2019, it has directly driven the total market value of Ningxia's capital market to exceed the 100 billion mark, and at the same time has led the continuous increase in the number of reserve listed companies in Ningxia.
The 2019 annual report shows that Baofeng Energy's main business is the chemical industry and the coking industry, accounting for 59.98% and 39.7% of revenue respectively. Although the financial report is good this time, there are still some problems that cannot be ignored.
1. The large-scale production expansion of leading enterprises may cause the price of polyolefin products to decline in the short term. Under the main influence of the month-on-month reduction in imports, the polyolefin market as a whole shows a balance of supply and demand. With imports approaching the same period in previous years, the room for import reductions in the next few months is no longer enough to quell the pressure brought about by new installations. , The price of polyolefin is likely to bear certain downward pressure.
2. Market competition is still fierce. At present, Baofeng Energy has formed a coal-based polygeneration circular economy industrial cluster integrating "coal, coke, gas, methanol, olefins, polyethylene, polypropylene, and fine chemicals", and is committed to substituting coal for petroleum production. Chemical Products. However, its gross profit margin is also declining. The gross profit margin has dropped from 46.9% in 2018 to 42.6% today.
At the same time, the company's gross profit decline has accelerated, from a year-on-year growth of 8.51% in the same period to a current year-on-year decline of 7.27%. In the same period, the gross profit margin of competitor China Shenhua increased slowly from 41.12% to 42.33%. With no big gap between products, this is not too optimistic for Baofeng Energy.
3. Baofeng Energy, which is generous to its controlling shareholders, has always been under debt pressure. According to the data of the 2020 semi-annual report, the company's current ratio and quick ratio are 0.76 and 0.63 respectively. Both figures are lower than 0.8, and the risk of default is high.
At present, my country’s olefin production gap is still large. Essence Securities analyst Zhang Wangqiang said that in 2019, my country’s ethylene and propylene gaps were about 23.67 million tons and 9.37 million tons, respectively. The consumption of polyethylene and polypropylene were 34.03 million tons and 26.63 million respectively. Tons, an increase of 14.7% and 11.5% year-on-year, Baofeng Energy still has broad room for growth.
At last
Kaiyuan Securities analyst Zhang Xucheng believes that the commissioning of the second phase of 2.2 million tons of methanol and 2.4 million tons of Hongsi coal mine will contribute to Baofeng Energy's performance in 2021 and increase the self-sufficiency rate of raw materials.
The second phase of 3 million tons of coke production, the third phase of 1 million tons of olefins, the fourth phase of 4 million tons of olefins (Inner Mongolia), and the fourth million tons of olefins (Inner Mongolia) will be commissioned in 2022, 2023, 2024 and 2025, respectively. Annual performance brings growth contribution.
CITIC Securities and Huachuang Securities reported that Baofeng Energy's arithmetic average growth rate for the next three years is 20.26% and 21.9%, respectively. It can be seen that Baofeng Energy still has long-term investment value in the future.
Source of this article: Songguo Finance, please indicate the copyright