On April 10, Satellite Petrochemical company released its 2019 annual report, achieving an operating income of 10.78 billion yuan, +7% year-on-year; Realized net profit of 1.273 billion yuan, an increase of +35%; Net profit deducted from non-net profit was 1.276 billion yuan, +44% year-on-year; And realized net cash flow from operating activities of 1.352 billion yuan, +80% year-on-year. The net profit returned to the parent in the fourth quarter was 351 million yuan.

in 2019, the largest contribution to the company added a PDH system increment, C3 integration further ascension. In 2019, the total gross profit of the company increased by 740 million yuan, of which the gross profit of acrylic increased by 130 million yuan, the gross profit of acrylic and polypropylene increased by 510 million yuan, the gross profit of polymer emulsion increased by 0.1 million yuan, the gross profit of SAP increased by 20 million yuan, and the gross profit of hydrogen peroxide increased by 86 million yuan.

(1) PDH profit remained flat in 2019, and the average PDH spread expanded by 2 yuan/ton year-on-year; The company added 450,000 tons of PDH and 300,000 tons of PP, significantly expanding profit; Subsidiary Satellite Energy achieved a net profit of 770 million yuan, + 390 million yuan year-on-year.

(2) acrylic acid profit narrowed, the average acrylic acid price difference narrowed 59 yuan/ton, butyl acrylate average price difference narrowed 99 yuan/ton; But the company benefited from propane to acrylic acid and ester integration advantages, profit also increased slightly, subsidiary Pinghu petrochemical net profit of 280 million yuan, +0.1 million yuan year-on-year.

2020Q1, the sharp fall in oil prices led to a sharp decline in C3 industry chain prices, of which propylene prices fell by 1525 yuan/ton, polypropylene prices fell by 1200 yuan/ton, acrylic prices fell by 1050 yuan/ton, butyl acrylate prices fell by 1350 yuan/ton.

However, with the decline in oil prices and the past winter demand, propane prices fell $289 / ton in the same period, and PDH profits rebounded sharply in March. PDH proved its ultimate viability with low oil prices. However, considering the high price of propane in January-February and the low PDH spread, as well as the sharp decline in product prices, the company's first-quarter results are expected to decline.

April, affected by the surge in demand for mask materials, the price of polypropylene fiber material skyrocketed, which led to the conversion of polypropylene wire drawing material to fiber material, driving the general rise in polypropylene prices; In addition, affected by the epidemic, the global demand for refined oil products fell sharply, and the global refinery operating rate was under pressure, which is expected to drive the refinery polyolefin production to decline. It is expected that the PDH profit of the company will benefit significantly in 2020Q2.

We believe that light hydrocarbon cracking has cost advantages in several olefin preparation routes, and even if oil prices are low, propane prices will be low, and the profitability of PDH is still guaranteed. The company has two sets of 900,000 tons of PDH, 450,000 tons of PP, 450,000 tons of acrylic acid and 480,000 tons of acrylic acid, 150,000 tons of SAP production capacity, C3 industry chain is complete, and the integration cost advantage is significant. The

C2 project will be put into operation, and the production capacity will increase greatly after 2020Q4. The cost advantage of ethane cracking to ethylene is outstanding. At present, the US MB ethane price is less than 90 US dollars/ton, at this price, even at the current lower polyethylene price, ethane cracking still has a good profit room. The company's biggest point of interest in the medium and long term is the high growth of 2.5 million tons of ethane cracking to ethylene project, which is equivalent to a quarter of the existing ethylene volume of Sinopec. At present, the company's Lianyungang petrochemical project and the company's United States project are steadily advancing, and the first phase of 1.25 million tons is expected to be put into production in 2020Q4.