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Insight | Time: Nov 10 2022 2:58PM  Editor:Tina Kong
Analysis of Q3 performance in listed polyester companies
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Listed polyester companies successively disclosed their performance report for Q3, 2022. Chemical fiber companies saw widely falling net profit and were under pressure. PET bottle chip companies saw stably rising profit, with promising growing space.

Refining products had narrowing price spread, with rising revenue but shrinking profit. Hengli Petrochemical suffered losses in Q3. Price of refining products increased after feedstock cost advanced and the revenue rose on the year, but the spread narrowed and profit shrank. In addition, Hengli Petrochemical had the first turnaround in Q3 2022 since it started operation in 2019. Falling sales resulted into worse-than-anticipated performance. Eastern Shenghong鈥檚 net profit reduced year on year. In Q3, its EVA, ACN and MTO spread shrank. Falling oil price ended up with depreciating inventory. Mega-refining project saw rising administration costs and financial costs yo-y before started production. Shenghong's Q3 performance was under burden.

Demand for PFY was muted and its prosperity is waiting for rise. Tongkun鈥檚 revenue and net profit both fell in Q3 as the inventory was devaluated after oil price decreased and ZPC鈥檚 refining integration project (Tongkun has 20% of equity participation) saw dropping profit. Meanwhile, downstream fabric mills ran at low capacity. With soft demand, inventory extended higher. Xinfengming鈥檚 net profit slumped by more than 90% on the year when the spread of pandemic greatly affected sales and demand was worse than anticipated. The inventory of POY, FDY and DTY was all above 30 days in Q3 2022, hitting historic high. Mounting stocks and reducing prices dragged down the performance.

PET bottle chip saw good domestic sales and exports and the performance saw high growth. China Resources and Wankai witnessed good performance in Q3. PET bottle chip market saw high prosperity. Demand for PET bottle chip from PET sheet field such as drinking water package, catering fresh box and medical examination kept high growth. Unit cost of PET bottle chip moved up, while sales grew under good demand. The PET bottle chip spread sustained high with high feedstock price and moderate downstream demand. The net profit surged in Q3.

Revenue and net profit of listed polyester companies in Q1-Q3, 2022
Company Revenue YOY change Net profit attributable to parent YOY change
Hengli 170389776443 12.48% 4790816500 -60.13%
Shenghong 46707970694 16.17% 1133321900 -17.12%
Tongkun 47188776924 -6.27% 1877815800 -69.55%
Xinfengming 37943308982 3.76% 178297900 -90.39%
China Resources 13008174394 40.89% 620085900 103.06%
Wankai 14772399483 124.24% 838562800 270.65%



In terms of profitability, compared with the three financial indicators of ROE, gross profit margin and net profit margin, the return on equity (ROE) of Wankai, China Resources and Hengli all exceeded 10% in the third quarter. Wankai had the highest ROE at 24.18% (the higher the ROE, the higher the return on investment, the better the competitiveness of the enterprise). Sales gross profit margin of Hengli reached the highest at 10.18%. The sales net profit margin of Wankai was the highest, at 5.98%, reflecting a better profitability.


As for the solvency, Hengli and Shenghong had an asset-liability ratio of nearly 80% and had an equity multiplier (financial leverage) around 4, mainly because the refining enterprises were heavy industry with big industrial size, having the demand to add many new capacity. In terms of current ratio (standard value 2) and quick ratio (standard value 1), China Resources performed better, indicating that its financial risk was low and its operating condition was relatively sound.

Financial indicators of listed polyester companies in Q3, 2022
Company  ROE Gross profit margin Net profit margin Asset-liability ratio Current Ratio  Quick ratio Equity Multiplier
Hengli 10.66% 10.18% 3.58% 76.91% 0.69 0.31 4.33
Shenghong 5.28% 8.71% 3.37% 79.29% 0.61 0.31 4.83
Tongkun 5.36% 5.78% 4.13% 59.19% 0.78 0.42 2.45
Xinfengming 1.74% 5.12% 0.75% 65.93% 0.87 0.56 2.94
China Resources 10.64% 7.52% 5.29% 29.21% 2.74 1.15 1.41
Wankai 24.18% 8.34% 5.98% 51.62% 1.54 0.89 2.07


From the growth point of view, chemical fiber leading companies expand capacity and the mega-refining and new materials projects are advancing steadily. According to Hengli Petrochemical's Q3 report, its 1.6 million tons/year high-performance resin and new materials project, Fenhu鈥檚 0.8 million tons/year functional film project, 1.6 billion square meters/year lithium diaphragm project and other projects under construction are on schedule. The whole process of the Shenghong鈥檚 mega-refining project will be opened soon, breaking through the field of new energy and new materials, and continuing to plan EVA, POE and other projects. In the future, with the gradual lifting of the bottleneck of silicon prices, the demand for photovoltaic EVA will continue to increase. Tongkun and Xinfengming actively layout the upstream PTA/MEG of the polyester industry chain and the downstream differentiated filament and polytextile integration projects. PET bottle chip enterprises consolidate the main business and expand capacity. Wankai Phase II was successfully put into production, and China Resources opened up new materials business, which has become the key point of future growth.



From the current point of view, the market will continue to adjust and change in the future. This year, the performance of the refining industry is generally better than that of chemical fiber. The supply of aromatics products such as PX is tight, and the price spread is relatively good, but with the commissioning of the new plant at the end of the year, the market pattern may be gradually adjusted. The fiber sector has been greatly affected by the epidemic and economic downturn this year, and the production curtailment of the plants is obviously earlier than in previous years, but it should not be ruled out to create conditions for rebound and repair in 2023. PET bottle chips have continued several years of high prosperity growth. Whether the capacity will be expanded as schedule and demand can remain good in 2023 still should be noted.

[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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