Shanghai Petrochemical's net profit decreased by 64.12% year on year

Sinopec Shanghai Petrochemical Co., Ltd. (00338. HK) released the third quarter report of 2019. In the first three quarters of 2019, Sinopec Shanghai achieved an operating revenue of 75.37 billion yuan, a year-on-year decrease of 6.74%; the net profit attributable to the shareholders of the parent company was 1.672 billion yuan, a year-on-year decrease of 64.12%; the net profit attributable to the shareholders of the parent company after deducting non recurring profit and loss was 1.522 billion yuan, a year-on-year decrease of 67.42%; and the earnings per share was 0.144 yuan. Following the release of Shanghai Petrochemical's financial statements in the first three quarters, UBS reduced the target price of Shanghai Petrochemical to HK $3.15. UBS said Sinopec's performance was slightly lower than the bank expected. In the third quarter alone, Sinopec's net profit fell 53% to RMB 530 million on an annual basis, but rose slightly by 2% on a quarterly basis. Considering the inventory loss caused by the fall in oil price, the bank believes that Sinopec's performance in the third quarter is stable on a quarterly basis. According to UBS, it is still unclear about the possible negative impact of the rising freight of VLCC on Shanghai Petrochemical. Based on the transportation cost and inventory loss, the bank lowered its profit forecast for Shanghai Petrochemical from this year to 2021, which is expected to be between 2.5 billion yuan and 3.1 billion yuan. The target price of H-shares has also been reduced from 3.36 Hong Kong dollars to 3.15 Hong Kong dollars, maintaining the "buy" rating.

From the current international and domestic situation, the uncertain factors that affect the performance of Sinopec Shanghai are increasing. The impact factors of oil price fluctuation are increasing, and the safety and environmental protection challenges are severe. The products of private refining projects characterized by large refining, large ethylene and large aromatics will enter the market one after another, which will bring greater impact to the petrochemical industry and intensify the market competition of the petrochemical industry. It is understood that Shanghai Petrochemical is mainly engaged in the processing of petroleum into a variety of petroleum products, intermediate petrochemical products, resins, plastics and synthetic fibers. It is one of the largest integrated and highly integrated modern petrochemical enterprises in China, and an important base for the development of modern petrochemical industry in China. On October 23, due to the expiration of the existing framework agreement on December 31, 2019, and to ensure the normal operation of the company is not affected, Shanghai Petrochemical signed the renewed framework agreement on product mutual supply and sales services with Sinopec Group and Sinopec, as well as the renewed framework agreement on comprehensive services with Sinochem group, which is valid for three years until December 31, 2022. Expiration. According to Sinopec, the renewed framework agreement can only come into effect when the company's first extraordinary general meeting of shareholders in 2019 approves the renewed framework agreement and the expected continuing connected transactions under it, including the annual high limit.