Jintai Feng International Holdings Limited (Stock Code: 9689.HK) successfully transferred from the Growth Enterprise Market to the Main Board for listing and trading on May 17, 2023. The company is the third largest private refined oil distributor in Guangdong Province, mainly operating as a wholesale provider of oil products and other petrochemicals based in Guangdong. Frost & Sullivan (hereinafter referred to as 'Frost & Sullivan') provides exclusive industry advisory services to Jintai Feng International Holdings Limited, and we hereby extend our warm congratulations on its successful listing.
Jintai Feng International Holdings Limited (hereinafter referred to as 'Jintai Feng') successfully completed the transfer to the Main Board of the Hong Kong Stock Exchange on May 17, 2023. The company was listed on the Main Board of the Hong Kong Stock Exchange through the GEM transfer mechanism. The last trading day on the GEM was May 16, 2023, and trading on the Main Board began at 9 a.m. on May 17, 2023.
During the Hong Kong listing process, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the issuer's competitive advantages, assisting the issuer, investment banks, and other intermediaries in completing the relevant parts of the prospectus (such as overview, competitive advantages and strategy, industry overview, business, and other important chapters), helping the issuer communicate with the Stock Exchange and investors, assisting investors in quickly understanding the market ecosystem and competitive landscape, and supporting the issuer in completing feedback on various industry-related issues from the Stock Exchange.
Investment highlights
The company adopts a comprehensive and strict quality monitoring system;
The company benefits by being close to its customers;
The company is able to maintain a stable business network with suppliers and customers;
The company has an experienced management team and skilled employees.
According to a report by Frost & Sullivan,
Based on its revenue in 2021, the company is the third-largest private refined oil distributor in Guangdong Province.
Overview of the Petroleum Industry in China
China is the world's largest energy consumer, accounting for about 26% of the world's primary energy consumption. As the world's second-largest economy, China needs a large amount of energy to support modernization and urbanization. Traditional energy sources such as coal and oil are widely used as fuels but still dominate China's primary energy consumption. In 2021, coal and oil consumption accounted for about 55.8% and 19.4% of China's total primary energy consumption respectively.
China's major oil fields include the Daqing Oilfield, Liaohe Oilfield, Karamay Oilfield, and Shengli Oilfield. China's oil production decreased from 1.997 billion tons in 2016 to 1.99 billion tons in 2021. Given the limited domestic oil reserves, China relies heavily on oil imports. China mainly imports oil from countries such as Russia, Saudi Arabia, and Angola. From 2016 to 2021, China's oil imports increased from 3.81 billion tons to 5.13 billion tons, with a compound annual growth rate of 6.1% during the same period.
From 2021 to 2026, according to the Chinese government's energy plan, China's annual oil production is expected to remain at around 2 million tons, with a compound annual growth rate estimated at 0.6%. At the same time, the increasing number of vehicles in use in China drives up oil demand, leading to continuous growth in oil imports. It is projected that by 2026, China's oil imports will reach 6.423 billion tons, with a compound annual growth rate from 2021 to 2026 of 4.6%. Due to China's limited own oil supply, the climbing oil imports thus account for a larger share of the total supply. It is expected that this trend will continue during the forecast period. The degree of import dependence rose from 65.9% in 2016 to 72.5% in 2021, and is expected to reach 76.0% by 2026.
Overview of the Chinese crude oil market size
Forecast from 2016 to 2026
Source: Frost & Sullivan report
Overview of the refined oil trading market in China and Guangdong Province
China's refined oil products mainly refer to gasoline, kerosene, and diesel. Gasoline, kerosene, and diesel are hydrocarbon compounds extracted in liquid form from refined petroleum. Gasoline and diesel are primarily used as engine fuel, while kerosene is widely used as a lamp and lighting fuel, heating fuel, chemical characteristic agent, etc.
From 2016 to 2021, China's gasoline consumption increased at a compound annual growth rate of about 4.1%, while production also grew at a compound annual rate of about 3.7%. In Guangdong Province, consumption increased at a compound annual rate of about 3.0% from 2016 to 2021, while production increased at a compound annual rate of 9.4%.
China and Guangdong Province's gasoline production and consumption
Forecast from 2016 to 2026
Source: Frost & Sullivan report
From 2016 to 2021, China's diesel consumption decreased at a compound annual rate of about -4.2%. At the same time, diesel production decreased by only about -1.8% annually during the same period. From 2016 to 2021, diesel production in Guangdong Province increased from about 1.38 million tons to about 1.65 million tons, with a compound annual growth rate of about -1.9% during the same period. Due to increased environmental awareness, it is expected that China's diesel market will show a downward trend, and the growth rate in Guangdong Province is expected to decline.
Diesel production and consumption in China and Guangdong Province
Forecast from 2016 to 2026
Source: Frost & Sullivan report
China's refined oil trading market increased from 1.796 billion tons in 2016 to 1.807 billion tons in 2021, with a compound annual growth rate of about 0.1%. In 2021, the transaction volume of private enterprises accounted for about 31.0% of the total trading market. In 2021, the transaction volume of private enterprises accounted for about 34.6% of the total trading market in Guangdong Province. This segment increased from 600 million tons in 2016 to 730 million tons in 2021, with a compound annual growth rate of about 3.8%. The market was affected by the spread of COVID-19 in the months prior to 2020. However, in China, due to strict government quarantine and preventive measures, COVID-19 has been strictly controlled and is not expected to affect the long-term market in Guangdong Province and other regions of China.
It is expected that the growth of the refined oil trading market in Guangdong Province will slow down from 2016 to 2021 to 2021 to 2026, due to the anticipated slowdown in macroeconomic growth in Guangdong Province during the same period compared to 2016 to 2021. In addition, it is expected that the trading volume of state-owned enterprises will decline from 2021 to 2026, reducing overall market growth, while it is expected that private enterprises will continue to grow steadily from 2021 to 2026, with a compound annual growth rate of 2.5%.
Market scale of refined oil trading in China and Guangdong Province
Forecast from 2016 to 2026
Source: Frost & Sullivan report
China and Guangdong Province
Competition pattern in the refined oil market
In 2021, most refined oil distributors were concentrated in Shandong Province, Guangdong Province, and Fujian Province, with about 80 companies, 60 companies, and 30 companies respectively being qualified to engage in refined oil wholesale business. By the end of 2021, more than 400 companies (including branches) had obtained the qualification to engage in refined oil wholesale business in China. No private enterprise accounted for more than 1% of the national market share. Jintai Feng accounted for about 0.1% of the entire refined oil trade market in China in 2021.
China and Guangdong Province
Market drivers of the refined oil market
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The increasing number of motor vehicles in use
With increasing income and urbanization, more and more residents in China are able to afford cars. Since the automotive industry is a major downstream market for gasoline and diesel, it is expected that the growing number of vehicles in China will drive up refined oil consumption in the coming years. Among all provinces, Guangdong has one of the largest passenger vehicle fleets in China. In 2021, the passenger vehicle fleet in Guangdong Province was 2.37 million vehicles, compared to 1.49 million in 2016. From 2016 to 2021, the ownership of passenger vehicles in Guangdong Province increased at a compound annual growth rate of about 9.8%, and it is expected that the growth trend of the passenger vehicle market in Guangdong Province will continue.
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Industry development
The consumption of refined oil products in Guangdong is relatively concentrated, with the Pearl River Delta accounting for a high market share. According to the '13th Five-Year' plan of Guangdong Province, the development of industrial areas outside the Pearl River Delta will also receive strong support from the government. The potential development of this industry may promote demand for energy, including refined oil products.
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Vehicle emission standards are more stringent
With environmental issues, particularly air pollution, attracting high attention in China, stricter vehicle emission standards are expected. The emission limits and measurement methods for light-duty vehicles (China Phase V) have been implemented nationwide, while Phase VI was gradually introduced in 2020. More stringent standards drive market upgrades to higher-priced products, thereby boosting market revenue.
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Promote the Belt and Road Initiative
Guangzhou has always been one of China's central cities. With the nationwide promotion of the "Belt and Road" strategy, Guangdong may become an increasingly important transportation hub in China. It is expected that the growth in traffic flow will drive the gasoline and diesel markets in Guangdong. In addition, local governments issued the "Implementation Plan for Guangdong Province to Participate in the Construction of the 'Belt and Road'" in June 2015. Local governments have invested more than $55 billion to improve the construction of six major industries including infrastructure, energy, and manufacturing.
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Frost & Sullivan has extensive research experience in the energy and chemical industries, assisting well-known enterprises in successfully accessing capital markets. Successful listings include: Zhongbao New Materials (2439.HK), Shengneng Group (2459.HK), Jinli Yongci (6680.HK), Avia Avian (IDX: AVIA), Global New Materials (6616.HK), Dafeng Equipment (2153.HK), Yihai International (8659.HK), GHW (9933.HK), Sanhe Fine Chemicals (0301.HK), Xingyu Holdings (2346.HK), Xinghe Holdings (1891.HK), Xuyang Group (1907.HK), Long Resources (1712.HK), Shandong Gold (1787.HK), Henan Jinma (6885.HK), Xingye New Materials (8073.HK), Dongguang Chemicals (1702.HK), Zhongqi Group (1932.HK), Xinbang Holdings (1571.HK), Meigu Technology (8349.HK), Huajin International (2738.HK), Flott Glass (6865.HK), Dynos (1452.HK), Caike Chemicals (1986.HK), Chang'an Renheng (8139.HK), Sansida (1337.TWSE), Born NYSE, CPC NYSE, Gu NYSE, Tianhe Chemicals (1619.HK), Yihua Holdings (2121.HK), Sijia Group (1863.HK), and others.
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