Zhongtai: The performance of the three major oil companies is impressive and the fixed price supports the profits of long silk.

Zhongtai released a research report stating that in the first half of 2024, international oil prices as a whole were in a medium to high position, with a bias towards strength and volatility. High oil prices are supporting the prosperity of the chemical industry, while capital expenditures have slowed down. Against the background of national energy security and controllable independence, the three major oil companies have continued to increase reserves and production in the first half of the year under high oil prices, with outstanding performance and a long-term focus on shareholder returns. The growth rate of polyester filament industry has significantly slowed down, as actual new production capacity may have reached its peak due to the suspension/reduction and elimination of some installations. In addition, the one-price policy of polyester filament ensures profitability, as since May 23, the leading enterprise in the filament industry has significantly increased the processing fees for filament, opening a new round of limited production and price maintenance mode, leading to a noticeable increase in filament prices. Performance is strong in relation to oil prices, with overall good performance in the first half of the year. In the first half of 2024, international oil prices were in a medium to high position with a bias towards strength and volatility, with average prices of WTI crude and Brent crude at $78.74 and $83.42 per barrel, respectively, up by 5.3% and 4.4% year-on-year. In terms of corresponding sector indices, the petroleum and petrochemical sector's SHC industry index increased by 7.1% in the first half of 2024. Looking at individual industries based on the SHC three-tier classification standard, in the first half of 2024, the refining and chemical, oilfield services, oil and gas and refining trade, other petrochemicals, and oil product trade industries saw changes in their ups and downs of approximately +11.4%, +10.4%, -8.1%, -8.5%, and -16.4%, respectively. In the second quarter of 2024, the SHC industry indices for other petrochemicals, refining and chemical, oilfield services, oil and gas and refining trade, and oil product trade saw cumulative changes of approximately +1.2%, -2.7%, -5.5%, -10.7%, and -12.1%, respectively. High oil prices support economic prosperity, while capital expenditures have slowed down. In the first half of 2024, the petroleum and petrochemical industry had operating income, net profit attributable to the parent company, and non-recurring net profit of 4.1 trillion yuan, 218.9 billion yuan, and 219.5 billion yuan, respectively, up by 2.5%, 11.1%, and 13.0% year-on-year. in the first half of the year, the industry's gross profit margin, net profit margin, and return on equity (ROE) were approximately 19.0%, 5.8%, and 6.0%, respectively, up by 0.8 percentage points, 0.6 percentage points, and 0.1 percentage points year-on-year. In the second quarter of 2024, the industry's operating income, net profit attributable to the parent company, and non-recurring net profit were 2.0 trillion yuan, 107.7 billion yuan, and 109.58 billion yuan, respectively, down by 0.6%, 11.8%, and 15.2% year-on-year; while the gross profit margin, net profit margin, and ROE for the quarter were approximately 19.1%, 5.7%, and 2.9%, respectively, up by 0.8 percentage points, 0.6 percentage points, and 0.1 percentage points year-on-year. In terms of construction in progress and fixed assets, as of the end of the first half of 2024, the industry's construction in progress and fixed assets totaled 565.38 billion yuan and 1.9 trillion yuan, respectively, down by 2.1% and up by 6.5% year-on-year. Overall, construction in progress has seen negative growth compared to the same quarter of the previous year for seven consecutive quarters starting from the fourth quarter of 2022, while fixed assets have seen a decline in growth rate for five consecutive quarters. In terms of capital expenditures, the industry's cumulative capital expenditures in the first half of 2024 were 289.27 billion yuan, down by 10.3% year-on-year. In the second quarter of 2024, the industry's capital expenditures were 137.93 billion yuan, down by 23.7% year-on-year, marking the first negative growth in total industry capital expenditures since the fourth quarter of 2022. Geopolitical tensions and tight supply-demand conditions led to strength and volatility in oil prices in the first half of the year. Looking back at the trend of oil prices in the first half of 2024, at the beginning of the year, as market expectations of a global economic recession weakened and OPEC+ showed a high level of unity in actual production cuts, oil prices entered an upward trend. With ongoing geopolitical conflicts in areas such as Israel and Ukraine, as well as expectations of interest rate cuts by the Fed, oil prices reached a high point in the first half of the year at $86.91 and $91.17 per barrel for WTI and Brent crude, respectively, by early April. Subsequently, as geopolitical tensions eased and refineries in the Northern Hemisphere started maintenance periods, oil prices gradually began to decline from their highs. According to the content of the June OPEC+ meeting, the new round of production cuts is being implemented in two aspects: 1) the additional cut of 1.65 million barrels per day announced in April 2023 has been extended until December 2025; 2) the additional cut of 2.2 million barrels per day announced in November 2023 has been extended until the end of September 2024, with gradual increases in production planned thereafter. On September 5, OPEC announced a two-month extension of the production increase. Overall, OPEC's support for the global oil supply side has weakened. On the demand side, due to the increase in penetration rates of new energy vehicles and LNG heavy trucks, demand for gasoline and diesel is expected to decrease, while the increase in crude oil demand mainly comes from chemical and aviation coal demand. According to the IEA's forecast, global crude oil demand is expected to reach 103 million barrels per day in 2024, an increase of 970,000 barrels per day year-on-year. The three major oil companies: increasing reserves and production through lean management, long-term focus on shareholder returns. Against the background of national energy security and controllable independence, the three major oil companies have continued to increase reserves and production in the first half of the year under high oil prices. In the first half of 2024, the oil and gas equivalent production of PetroChina, China Petroleum & Chemical Corporation, and CNOOC Limited increased by 1.3%, 3.1%, and 9.3% year-on-year. Against the backdrop of a 4.4% increase in Brent oil prices year-on-year, the prices of crude oil for each company increased by 4.5%, 5.6%, and 9.2% year-on-year in the first half of the year, with outstanding performance in the upstream business. In terms of capital expenditures, in the first half of 2024, PetroChina, China Petroleum & Chemical Corporation, and CNOOC Limited had capital expenditures of 78.94 billion yuan, 55.9 billion yuan, and 63.1 billion yuan, down by 7.3%, 25.2%, and up by 11.7% year-on-year, respectively. In addition, as leaders in central SOE reform, the three major oil companies have long been focused on shareholder returns. In the first half of 2024, PetroChina, China Petroleum & Chemical Corporation, and CNOOC Limited distributed mid-term dividends of 0.22 yuan per share, 0.146 yuan per share, and 0.74 Hong Kong dollars per share (tax included), with dividend ratios of 45.4%, 49.8%, and 40.3%, respectively. If we consider the dividend ratio of the three major oil companies at the end of 2023.As a reference, the estimated dividend yields for 2024 are approximately 5.9%, 6.1%, and 5.2% for various companies as of September 10th. In terms of performance, in the first half of 2024, PetroChina, China Petroleum & Chemical Corporation, and CNOOC Limited had revenues of 15539, 15761, and 2268 billion yuan respectively, with year-on-year changes of +5.0%, -1.1%, and +18.1%. Net profits attributable to parent companies were 886, 357, and 797 billion yuan, with year-on-year changes of +3.9%, +1.7%, and +25.0%. Non-recurring net profits attributable to parent companies were 916, 356, and 792 billion yuan, with year-on-year changes of +4.8%, +5.7%, and +27.1%.Polyester filament: The one-price policy supports profits, and the performance of leading companies is impressive. 1) Industry expansion tends to be rational: In 2023, domestic filament capacity will increase by a net of 3.97 million tons, with a total capacity of 54.25 million tons/year, an increase of 7.9% year-on-year, with a CAGR of about 5.8% from 2019 to 2023. Industry growth is expected to slow significantly in 2024. According to Zhongtai statistics, the industry is expected to add only about 950,000 tons of capacity in 2024. Taking into account the shutdown/reduction and elimination of some devices, the actual increase in production may be lower, indicating that the overall industry capacity may have peaked. 2) The one-price policy ensures profitability: Since May 23, when the leading filament companies anchored filament processing fees to significantly increase prices, the price differentials have increased significantly. By the end of the second quarter of 2024, the prices of POY, FDY, and DTY had increased by 470, 170, and 220 yuan/ton respectively compared to May 23. In terms of performance, in the first half of 2024, Tongkun Group and Xinfengming Group achieved revenues of 48.21 and 31.27 billion yuan respectively, increasing by 30.7% and 11.0% year-on-year. Net profits attributable to shareholders were 1.07 and 0.6 billion yuan, increasing by 911.4% and 26.2% year-on-year. Risk warning: Macroeconomic fluctuations, geopolitical factors, significant fluctuations in oil prices, risks of deviation between data and actual conditions, lower-than-expected demand, and outdated third-party data information updates.