Tongkun Group (601233 CH) Buy: Constructive on cost integration and ZPC

Research evidence excerpt

Tongkun Group (601233 CH) Buy: Constructive on cost integration and ZPC

ndex +25%) on expectations of

52-WEEK PRICE (CNY)

structural polyester improvements driven by coordinated industry production

discipline, we believe the market has yet to fully price in the potential dividend and 28.00

earnings upside from its investment in ZPC and cost efficiency from enhanced 18.20

integration. As such, we continue to see medium term re-rating potential and 8.40

maintain our Buy rating. Key catalysts include potential dividend payouts from ZPC 05/25 11/25 05/26

Target price: 24.10 High: 25.78 Low: 10.40 Current: 19.70

and further progress in the company’s coal chemical projects.

Source: LSEG IBES, HSBC Qianhai Securities estimates

Coal-MEG advantage appears: Amid the Middle East conflict, the economics of

China coal -MEG production have improved significantly. And Tongkun’s 600ktpa Yi Ru* (Reg. No. S1700520120001)

gas-to-MEG project in Xinjiang is also transforming to a coal-MEG route to further Head, A-share Petrochem & New Materials Research

HSBC Qianhai Securities Limited

lower costs. The conversion will be complete in late 2026. Meanwhile, Tongkun plans yi.ru@hsbcqh.com.cn

a new coal-to-MEG expansion project, alongside upstream captive coal mine +86 21 5066 2008

integration to further reduce production costs (source: company announcement). Jill Huang* (Reg. No. S1700524120002)

Analyst, A-share Petrochemical and New Materials

Given the rise in global energy costs, we believe the cost advantage of coal-MEG will HSBC Qianhai Securities Limited

become increasingly evident, which may enhance the long-term competitiveness of jill.q.huang@hsbcqh.com.cn

+86 21 5066 2024

its overall polyester chain.