BAOFENG ENERGY(600989) 中银证券·2025-01-06 03:15Investment Rating - The report assigns a "Buy" rating to the company, with a market price of RMB 16.84 and a sector rating of outperforming the market [1]. Core Views - The company, Baofeng Energy, is recognized as a high-quality target in the new coal chemical industry, with continuous improvement in operational performance and expected growth driven by new capacity releases in Inner Mongolia [3][5]. Summary by Sections Company Overview - Baofeng Energy is a coal-based multi-production circular economy demonstration enterprise, focusing on the coal-to-olefins process, with ongoing upgrades in production technology and management efficiency [3][16]. - The company has a complete coal chemical circular economy industrial chain and adheres to the national "dual carbon" strategy, promoting sustainable development [16][18]. Financial Performance - From 2016 to 2023, the company's revenue grew from RMB 8.03 billion to RMB 29.14 billion, with a CAGR of 20.22%, while net profit increased from RMB 1.72 billion to RMB 5.65 billion, with a CAGR of 18.54% [22]. - In the first three quarters of 2024, the company achieved revenue of RMB 24.28 billion, a year-on-year increase of 18.99%, and a net profit of RMB 4.54 billion, up 16.60% year-on-year [22]. Production Capacity and Expansion - The company has a coal-to-olefins capacity of 2.2 million tons per year in Ningxia and is expanding its capacity in Inner Mongolia to 5.2 million tons per year, which will significantly increase its market position [8][21]. - The first production line of 1 million tons per year in Inner Mongolia has successfully entered trial production as of November 2024 [8][21]. Market Position and Competitive Advantage - The company benefits from a cost advantage in coal-to-olefins production compared to traditional oil-based methods, especially in a market environment where oil-coal price differentials remain high [8][37]. - The focus on coal-based production aligns with the growing domestic demand for olefins, with projected increases in consumption for both ethylene and propylene [37][40]. Profitability and Valuation - The forecasted net profits for 2024, 2025, and 2026 are RMB 6.33 billion, RMB 12.57 billion, and RMB 14.20 billion, respectively, with corresponding P/E ratios of 19.5, 9.8, and 8.7 [5][7]. - The company maintains a strong gross margin, with the olefins segment showing improved profitability due to favorable market conditions [25][31].