At the beginning of the New Year, the domestic private refining and chemical leading enterprise Rongsheng Petrochemical (002493) announced that it will invest heavily in the construction of Rongsheng New Materials (Zhoushan) Co., Ltd. Jintang new materials project, the main development of domestic shortage of high-end chemical products, in order to improve the profit margin of enterprises. The project investment is expected to be supported by the financial resources of the Middle East energy giant Saudi Aramco.

Rongsheng Petrochemical announcement shows that the total investment of the project is 67.5 billion yuan, the source of funds is the company's own funds and bank loans, and the construction period is 3 years. After completion, Rongsheng Petrochemical is expected to achieve a net profit of 15.463 billion yuan per year, the after-tax financial internal rate of return of nearly 25%, investment payback period of 6.11 years.

This cooperation is the further integration of the two sides in the refining and chemical industry chain after Saudi Aramco invested in the 40 million tons/year Zhejiang Petrochemical large-scale refining and chemical integration project under Risheng Petrochemical last year. According to the Memorandum of Understanding signed by the two sides, the cooperation is in the form of cross-ownership. Rissun Petrochemical intends to acquire a 50% stake in Saudi Aramco Jubail SASREF Refining and Chemical Company and participate in the expansion. Saudi Aramco intends to acquire a potential stake of up to 50% in CICC and jointly develop the upgrading and expansion of CICC's existing plants and the development of the new downstream Rongsheng New Materials (Zhoushan) project.

Analysts pointed out that after Saudi Aramco shares, or will share with Risesun the investment and capital expenditure of China Gold Petrochemical and new materials projects, greatly reducing Risesun's own financing costs. At the same time, the whole industrial chain layout of Jubailer refinery processing - Zhongjin Petrochemical restructuring - Jintang new material cracking can maximize the production competitive advantage brought by refining and chemical integration and improve the profitability of enterprises.

Source: Securities Times