【Zhongyuan Chemical】 Satellite Chemical (002648) Annual Report Review: Deducted non-recurring profit maintains growth; cost advantages are expected to improve amid high oil prices

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Key Takeaways

Event: The company released its 2025 annual report. In 2025, the company achieved operating revenue of 46.07B yuan, up 0.92%, and net profit attributable to the parent company of 5.31B yuan, down 12.54% year over year. Net profit attributable to the parent company after excluding non-recurring items was 6.29B yuan, up 4.02% year over year. Basic earnings per share were 1.58 yuan.

Cost advantages support profitability; non-recurring performance delivers steady growth. The company’s main businesses include two major industrial chains, C3 and C2. The C3 industrial chain covers propylene and downstream products such as acrylic acid and acrylic esters. The C2 industrial chain involves ethane cracking to produce ethylene and downstream derivatives such as polyethylene. Since 2025, international oil prices have generally trended downward, driving downward prices for the company’s key products. According to data from S&P Global, the average prices of polyethylene, ethylene oxide, polypropylene, and acrylic acid in 2025 were 7574.4 yuan/ton, 6448.55 yuan/ton, 6973.04 yuan/ton, and 6676.14 yuan/ton, respectively, representing year-over-year changes of -10.78%, -5.41%, -7.39%, and +2.93%, respectively. Against the backdrop of falling product prices, the company, leveraging the cost advantages brought by its unique process route, has maintained a sound profitability trend. In addition, in 2025, the company’s 80k-ton-per-year new 1,3-pentanediol and 90k-ton-per-year acrylic acid projects were successfully put into operation, further boosting business scale. In 2025, against the backdrop of an industry downturn in sentiment, the company’s full-year net profit after excluding non-recurring items continued to grow, highlighting the resilience of its operations.

In a high-oil-price environment, the cost advantage of the light-alkane route becomes more prominent; long-term competitiveness continues to improve. Compared with the oil feedstock route, the company’s light-alkane process route uses light alkanes such as ethane and propane as raw materials. Due to the shale gas revolution in the United States, a large supply of low-cost ethane and propane resources has been generated, thereby delivering a substantial cost advantage for the light-alkane process route. In recent years, against the backdrop of a downturn in industry conditions, the trend of overseas high-cost plants exiting the market has continued. In regions such as Europe, Japan, and South Korea, some ethane crackers and basic chemical plants have shown continued contraction under multiple pressures, including raw material costs, energy costs, carbon costs, and weak demand. Since April 2024, multiple ethylene cracking facilities in Europe have already shut down, reducing total ethylene capacity by approximately 4.3 million tons per year, accounting for about 20% of Europe’s ethylene capacity. In South Korea and Japan, some oil-feed petrochemical facilities are also accelerating exit or consolidation. Since March, affected by sudden geopolitical developments in the Middle East, international oil prices have risen significantly. On the one hand, this has sharply increased the prices of olefins; on the other hand, it has further impacted the olefin production value chain derived from oil cracking. In a high-oil-price environment, the company’s process-route cost advantage is expected to become more prominent, and its long-term competitiveness is expected to continue improving.

Rich new project pipeline; strong future growth momentum. The company continues to advance strategies to strengthen, extend, and complete the industrial chain. The advantages of industrial-chain integration are clearly accelerating. At the same time, the company has already built the largest acrylic acid and ester industrial chain in China and the second largest globally. The company’s leading ethane cracking to produce ethylene industrial chain, together with deep synergy derived from upstream raw material self-sufficiency and downstream product extensions, has formed a highly competitive integrated industrial layout. The company continues to推进 construction of projects such as 160k tons per year of polymer latex, 300k tons per year of superabsorbent resin, 200k tons per year of refined acrylic acid, and 260k tons per year of aromatic integrated units, promoting the refinement and deep processing of high-value-added products from comprehensive utilization of light alkanes, thereby expanding upstream products into high-end downstream products. With multiple projects supporting it, the company’s future performance growth has a solid foundation.

Profit Forecast and Investment Rating: We expect the company’s EPS for 2026 and 2027 to be 2.39 yuan and 2.58 yuan, respectively. Based on the closing price of 27.78 yuan on March 27, the PE ratios are 11.62x and 10.78x, respectively. Considering industry prospects and the company’s industry position, we give the company an “Buy” investment rating.

Risk Warning: Demand falling short of expectations, product price declines, and intensifying industry competition.

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