Since the beginning of 2020, affected by the global epidemic, crude oil has fallen to historically low prices. We have even witnessed the emergence of negative oil prices. This was completely unimaginable a few months ago.
For the petrochemical industry, this is the worst time and the best time.
The so-called worst moment, the two barrels of oil that dominate the petrochemical industry must have a deep understanding. The first quarter report of 2020 shows that PetroChina and Sinopec, the monopoly leaders in the petrochemical industry, each lost more than 10 billion.
The so-called best moment is for the relatively downstream refining and chemical companies. The same is the first quarter report data of 2020. The three largest and most representative private refining and chemical listed companies in the A-share market have all delivered extremely eye-catching performance data:
Hengli Petrochemical, first quarter performance increased by 323%, net profit was 2.1 billion
Rongsheng Petrochemical, first quarter performance increased by 102%, net profit was 1.2 billion
Hengyi Petrochemical, first quarter performance increased by 82%, net profit was 810 million
Obviously, these three petrochemical downstream companies have ushered in a historic low in oil prices. The best time to make a fortune silently!
There are actually many reasons for the loss of two barrels of oil, which we have described before. A very important point is that the two giants are too large to avoid macro black swans. The Zhishi Research Bureau has also discovered in the past two days that netizens on the Internet have great emotions about the loss of Two Barrels of Oil. However, we still have to point out that the loss of Two Barrels of Oil is not entirely a bad thing. In turn, it will force the real direction of Two Barrels of Oil. reform.
What about the three chemical fiber companies that bucked the trend and made huge profits? You know, from the profit growth rate, the growth rate of these three companies is even higher than that of the protective equipment company that has become popular during the epidemic. Let’s compare it with Yuyue Medical, the leading domestic ventilator. Yuyue Medical’s orders are full, and in the first quarter Performance only increased by 55%. Therefore, it is not an exaggeration to describe them as “making money silently”!
Why can these private petrochemical companies buck the trend and make big money?
Some people will say that because they are private enterprises, they naturally have flexible business decisions; others will say that they have better cost control than state-owned enterprises. These are all true, but they are also wrong.
You must know that in the past few years, these three private petrochemical companies have adopted a business strategy of rapid expansion with debt; and in the past two years, from Kangdexin to Kangmei Pharmaceutical All of them are negative cases of private enterprises collapsing due to debt expansion.
The rapid expansion of debt is a double-edged sword. If used well, the size of the company will increase tenfold in three to five years; if used poorly, it will collapse and go bankrupt.
These three private petrochemical companies are still doing well. The most important thing is that they have chosen the right direction – specializing in the mid-stream and downstream refining industries with high gross margins.
So, what impact has the historically low oil price had on private petrochemicals?
It should be said that cost reduction is a very significant benefit, and because they are in the middle and lower reaches, private petrochemical companies are actually consumers of oil – in terms of sales profit margin, The most intuitive expression.
Take Hengyi Petrochemical as an example. While the overall economy was stagnant due to the epidemic, revenue fell by 14% in the first quarter, but net profit still increased by 82%. This relied on This is the improvement in gross profit – Hengyi Petrochemical’s sales gross profit margin in the first quarter reached 8.69%, almost double the 4.39% in the same period last year.
In comparison, Hengyi Petrochemical’s gross profit of 8.69% is still the younger brother among the three major private petrochemical companies. The other two are Hengli Petrochemical with 22% and Rongsheng. Petrochemicals 17.78%. All far exceeded the same period last year.
To be honest, the expansions of the three major private petrochemical companies are all high-debt expansions. The asset-liability ratio has reached the red line of nearly 80%, which is indeed worrying. However, the low oil prices caused by the epidemic have brought high gross profits, which made the three major private petrochemical companies bet on their previous expansion. This is like adding several times leverage to buy a continuous daily limit. As long as the low oil prices last longer, the private companies will be better off. The good days of petrification will be longer.
Finally, we should get some inspiration from the surge in performance of private petrochemical companies:
Watching oil prices hit record highs again and again At new lows, everyone thought they were going to buy oil at the bottom, but judging from the bank’s crude oil product shortfall incident, Chinese investors, whether individuals or institutions, are deficient in psychological quality and professional knowledge, and the risks of directly participating in the oil game are not small. .
The next best thing is, with oil prices so low, wouldn’t it be good to buy companies that consume oil? In fact, in the petrochemical industry chain, with the exception of two barrels of oil, a considerable number of companies have actually benefited from low oil prices. In investing, we often say that money cannot buy certainty; by buying companies like this that benefit from low oil prices, you can also buy precious high certainty.</p
