Produced by Radar Finance Text | Edited by Xiao Sa | Deep Sea
The 100 billion "Refining Mao" Hengli Petrochemical has made another big move.
html On April 22, the company announced that the company's controlling shareholder Hengli Group and Saudi Aramco signed a "Memorandum of Understanding". The two parties are discussing Saudi Aramco's acquisition of 10% of the issued share capital of Hengli Petrochemical plus one share, as well as the Cooperation in crude oil supply, raw material supply, etc.As the world's largest oil producer, Saudi Aramco can be regarded as an old friend of the A-share market. In the past year, this giant with a market capitalization of over one trillion U.S. dollars has successively signed multiple agreements involving equity and industry with partners such as Rongsheng Petrochemical, Dongfang Shenghong’s wholly-owned subsidiaries Shenghong Petrochemical, and Yulong Petrochemical.
Hengli Petrochemical, the leading private refining and chemical company that plans to "join hands" this time, has its main business covering the entire upstream, mid-stream and downstream business areas of the entire industry chain of refining, petrochemicals and polyester new materials. It is known as the "Refining and Chemical Mao".
The actual controllers of Hengli Petrochemical are Chen Jianhua and Fan Hongwei. They came from grassroots backgrounds. They borrowed money 30 years ago to buy the Wujiang Chemical Fiber Weaving Factory that was losing money at the time, which became the starting point of Hengli Group. According to the 2024 Hurun Global Rich List, the two ranked 122nd on the list with a wealth of 115 billion yuan.
Radar Finance found that behind Chen Jianhua and Fan Hongwei’s hand in hand with Saudi Aramco, Hengli Petrochemical has high debts.
In 2023, Hengli Petrochemical's revenue will exceed 230 billion yuan, reaching a new high, but its net profit will be less than half of 2021. At the same time, at the end of last year, Hengli Petrochemical's asset-liability ratio was 76.98%, with total liabilities as high as 200.6 billion yuan and short-term borrowings of 66.995 billion yuan; while monetary funds were only 20.469 billion yuan, which could not cover short-term debt.
signed a memorandum with Saudi Aramco
As a representative of Middle East capital with a heavy position in China, Saudi Aramco has set its sights on another A-share company.
According to Hengli Petrochemical's announcement, the company received a notice from its controlling shareholder Hengli Group Co., Ltd. (hereinafter referred to as "Hengli Group") on April 22, 2024, that it has entered into an agreement with Saudi Arabian Oilcompany (hereinafter referred to as "Saudi Aramco") The Memorandum of Understanding was signed.
According to the content of the memorandum, the two parties are discussing: Saudi Aramco intends to acquire 10% plus one share of the issued share capital of Hengli Petrochemical from Hengli Group; and Hengli Group will support and promote Hengli Petrochemical and Saudi Aramco in crude oil Strategic cooperation in supply, raw material supply, product procurement, technology licensing, etc.
Hengli Petrochemical stated that the aforementioned terms only reflect the preliminary intention and principles of cooperation between the two parties and are not binding. After the memorandum is signed, Saudi Aramco will carry out due diligence on the company and other work.
Currently, Hengli Petrochemical is actually controlled by Chen Jianhua and Fan Hongwei. Chen Jianhua is the chairman and president of Hengli Group, and Fan Hongwei is the current chairman of the listed company.
As of the date of this announcement, Hengli Group directly and indirectly holds 2.1 billion shares of Hengli Petrochemical, accounting for 29.84% of the company’s issued share capital; Hengli Group and its persons acting in concert hold a total of 5.311 billion shares of the company, accounting for 29.84% of the company’s issued share capital. 75.45% of the issued share capital.
Hengli Petrochemical believes that if the aforementioned share transfer matters are implemented smoothly, it will be conducive to optimizing and improving the company's capital structure.
In addition to cooperation in the equity field, Saudi Aramco is also one of Hengli Petrochemical's important suppliers of crude oil and other raw materials. In October last year, Li Feng, secretary of the board of directors of Hengli Petrochemical, revealed that Hengli and Saudi Aramco have continued cooperation in crude oil procurement.
Regarding the planned introduction of strategic investors this time, Cinda Securities pointed out that after the completion of Saudi Aramco’s strategic investment, the company is expected to usher in new opportunities in terms of raw material supply security, product sales channel development and technical cooperation. According to
data, Saudi Aramco was founded in 1933. Its main business is the exploration, development and production of crude oil, condensate, natural gas and natural gas liquids. In 2023, Saudi Aramco's total revenue will be US$440.88 billion and net profit will be US$121.3 billion.
In recent years, Saudi Aramco has continued to expand its presence in China, involving areas such as emission reduction, materials research and development, and the chemical industry, and has increased cooperation in the form of equity participation.
According to statistics from 36Kr.com, Saudi Aramco’s investments in China in 2023 include: in Zhejiang, it acquired 10% of the equity of Rongsheng Petrochemical Co., Ltd. for US$3.4 billion; in Liaoning, it invested US$12 billion to develop fine chemicals and raw material engineering; In Fujian, Saudi Basic Industries Corporation and Fujian Province established Fujian Zhongsha Petrochemical Co., Ltd., with the total project investment expected to reach US$6.4 billion; in Jiangsu, a cooperation framework agreement was signed with Oriental Shenghong to promote the acquisition of 10% of the strategic equity of Shenghong Petrochemical Discussion; In Shandong, Saudi Aramco signed a memorandum of cooperation with Shandong Yulong Petrochemical to promote relevant discussions on the acquisition of 10% of the strategic equity of Yulong Petrochemical.
In addition to investments in its main business, Prosperity 7, a subsidiary of Saudi Aramco Venture Capital, has offices in Beijing and Shanghai. The fund size before the capital increase was US$1 billion, focusing on investments in disruptive technology companies outside the energy field.
Net profit surged but was less than half of the peak period
On the same day when the above-mentioned memorandum was disclosed, Hengli Petrochemical also announced its results for the first quarter of 2024.
According to the financial report, in the first quarter of 2024, the company achieved total operating income of 58.412 billion yuan, a year-on-year increase of 4.02%; net profit attributable to shareholders of listed companies was 2.139 billion yuan, a year-on-year increase of 109.8%.
As for the main reason for the change in net profit, Hengli Petrochemical said that the company's leading products such as aromatic hydrocarbon chain px and pure benzene have maintained a relatively high business cycle, and coal chemical products such as acetic acid, adipic acid and liquid ammonia have better profitability.
In addition, the company's downstream demand for polyester chemical fiber, functional films and other products has recovered along with the recovery of residential consumption and industrial demand, and the price difference has further recovered; the upstream coal cost and price have further declined, and the cost and price of crude oil have remained relatively stable. The company's comprehensive cost of "oil-coalization" integration and The advantages of product structure have been further highlighted, and the company's profitability has been accelerated.
In the 2023 annual report announced not long ago, Hengli Petrochemical also handed over a report card with a sharp increase in net profit.
's financial report shows that in 2023, the company achieved operating income of 234.791 billion yuan, a year-on-year increase of 5.61%; it achieved a net profit attributable to shareholders of listed companies of 6.905 billion yuan, a year-on-year increase of 197.83%.
According to Flush ifind data, Hengli Petrochemical's revenue reached a record high in 2023, but its net profit attributable to the parent company is still less than half of its peak in 2021.
In 2021, Hengli Petrochemical's net profit attributable to its parent company reached a new high of 15.531 billion yuan, but it encountered a profit "Waterloo" in the following year, plummeting 85.07% year-on-year.
At that time, the company stated that the profit decline in 2022 was mainly due to the rapid rise in prices of major raw materials such as crude oil and high and wide oscillations. At the same time, the recovery of industry market demand was weak. The company faced the dual operation of historically extremely high operating costs and low industry demand. extrusion.
It is not difficult to see that as a cyclical enterprise, Hengli Petrochemical's net profit performance is mainly affected by changes in upstream costs and the prosperity of downstream demand.
At present, the company's performance in the first quarter of 2024 is improving, but in the face of the petrochemical industry's sudden warming and cold, Hengli Petrochemical's performance pressure is still not small.
html On April 23, Tianfeng Securities analyst Zhang Fiexi pointed out in a research report that due to the drag on the olefin boom, Hengli Petrochemical’s net profit forecast for 2024 and 2025 will be lowered from 13 billion and 16.3 billion to 95 respectively. billion and 12 billion, giving the company a forecast of net profit attributable to the parent company in 2026 of 13 billion.Judging from this prediction, Hengli Petrochemical will still have a long way to go before its profit scale returns to its peak.
It is worth mentioning that Hengli Petrochemical's dividends have always been relatively generous. According to ifind data, the company has distributed cash dividends 12 times since its listing in August 2001, with a cumulative dividend of 18.534 billion yuan and a dividend rate of 31.68%.
According to the 2023 profit distribution plan, the company plans to distribute a cash dividend of 0.55 yuan (tax included) to all shareholders per share, with a total cash dividend of 3.872 billion yuan (tax included), and the cash dividend ratio is 56.07%.
However, Chen Jianhua and Fan Hongwei directly and indirectly hold 75.45% of the shares of Hengli Petrochemical. According to this dividend plan, the two’s cash dividends in 2023 will reach nearly 3 billion yuan.
The debt scale exceeds 210 billion yuan
The entrepreneurial story of Chen Jianhua and Fan Hongwei can be traced back to the 1990s.
According to media reports, in 1994, Chen Jianhua and Fan Hongwei, who were only 23 years old, borrowed 2.69 million to subscribe to the Nanma Town-run collective weaving factory that was on the verge of bankruptcy, and renamed it Wujiang Chemical Fiber Weaving Factory.
The first thing they did after the acquisition was to eliminate all backward shuttle looms and borrow money to introduce advanced 1,200-spindle network looms. The new equipment improved output and quality, allowing the factory to make a profit of more than 10 million yuan in the second year.
As for the first pot of gold for the couple to start a business, the source is the same as that of most ordinary people. Chen Jianhua once recalled that he dropped out of school due to family poverty before he was 14 years old, and then joined the silk industry. Relying on the silk trade, he already had millions of assets in his early 20s.
During the subsequent Asian financial crisis in 1997, Chen Jianhua and his wife went in the opposite direction. Taking advantage of the contraction of many textile companies, they pocketed the looms they sold at low prices. After this crisis is over, their textile factories will stand out thanks to this batch of advanced equipment.
started in the textile industry, and Chen Jianhua and Fan Hongwei continued to expand upstream of the industry chain. In 2002, Jiangsu Hengli Chemical Fiber Co., Ltd. was officially established, with a total investment of 2.2 billion yuan in the first phase of the project.
In 2010, Hengli Group's 200,000-ton industrial yarn project was officially put into production, making it the world's largest polyester industrial yarn manufacturer, replacing the German company. In the same year, the foundation of Hengli Industrial Park was laid, and the company began to officially enter the petrochemical industry.
With the first phase of the Changxing Island Industrial Park PTA project put into operation in 2012 and the second phase in 2015, the group has the world's largest single PTA plant with an annual output of 6.6 million tons, and has officially entered the petroleum refining field.
Currently, Hengli Petrochemical has an upstream crude oil processing capacity of 20 million tons/year, a coal processing capacity of 5 million tons/year, a 1.5 million tons/year ethylene unit, an annual output of 5.2 million tons of px and an acetic acid production capacity of 850,000 tons; midstream It has a production capacity of 16.6 million tons of PTA and a production capacity of 1.8 million tons of fiber-grade ethylene glycol; its downstream products include civil polyester filament, industrial polyester filament, bopet, pbt, PBS/pbat and other new polyester and chemical material products.
However, on the other side of the entire industry chain layout, the commissioning of many projects corresponds to huge capital expenditures.
Soochow Securities pointed out that since 2021, Hengli Petrochemical has entered a new round of capital expenditure cycle. In 2021, 2022 and 2023, the company's capital expenditures will be 13.4 billion yuan, 25.7 billion yuan and 39.7 billion yuan respectively. Among them, 2023 is the peak period of the company's project construction, setting a new high since the refinery was put into operation in 2019.
Capital expenditures remain high, which has also pushed up the debt scale of Hengli Petrochemical.
's financial report shows that at the end of 2023, Hengli Petrochemical's total liabilities were 200.6 billion yuan, and the asset-liability ratio was 76.98%; of which short-term borrowings were as high as 66.995 billion yuan, notes payable and accounts payable were 27.601 billion yuan, and non-current liabilities due within one year were 13.498 billion yuan, while monetary funds are only 20.469 billion yuan, which cannot cover short-term debt.
Recently, the company replied to investors on an interactive platform that the company's asset-liability ratio is closely related to project capital expenditures. From 2022 to the present, the company has entered a new round of capital expenditures. In the
annual report, Hengli Petrochemical stated that starting from the second half of 2024, the company will basically end the peak period of this round of investment and construction and capital expenditures, and the subsequent business focus will be on "optimizing operations, reducing liabilities and strengthening dividends", and will continue to Create a value-based "growth + return" listed company.
Radar Finance will continue to pay attention to the subsequent development of Hengli Petrochemical.
