Keyuan Petrochemicals (PINK:KEYP)

First Quarter 2012 Results

• Sales for the first quarter ended March 31, 2012 were $183.3 million, an increase of $36.5 million, or 24.9% from the first quarter of 2011.
• Net income attributable to common shareholders was $1.6 million for the first quarter of 2012, with diluted net loss per share of $0.03 compared to net income of $4.9 million and diluted earnings per share of $0.08 in the first quarter of 2011.

"Our first three months 2012 revenues benefitted from solid customer demand and expanded production capacity," declared Mr. Chunfeng Tao, Chairman and Chief Executive Officer of Keyuan Petrochemicals Inc. "Although our margins were negatively impacted by higher raw materials costs, with a series of initiatives on major projects and our SBS facility ramping into commercial production, I believe Keyuan's core earnings potential continues to improve."

Full Year 2012 Guidance

Management is forecasting $880 million of revenues, $30 million of net income and 760,000 MT of production for 2012. This assumes approximately $100 million to $110 million of revenue and $10 million to $11 million of net income contribution from its SBS production facility.

Updates on Internal Control

Since early 2012, the Company has implemented an overall comprehensive budget management system ("The General Rule of Budget Performance Assessment"), which is executed and controlled by the planning finance department to review and instruct all other departments. The budget control system includes evaluating a "Budget Enforcement Monthly Assessment Form" and a "Budget Enforcement Monthly Record Form" on monthly basis to greatly improve the Company's operating efficiency.

The Company began to implement a management and evaluation system for personnel position responsibility standards, training, assessment and promotion which defines the talent introduction plan and payroll multiplication plan; forms the effective incentive system and commitment system; and is designed to retain personnel and prevent talent losses.

NINGBO, China, May 16, 2012 /PRNewswire-Asia-FirstCall/ -- Keyuan Petrochemicals Inc. (OTCQB: KEYP), ("Keyuan" or "the Company"), an independent manufacturer and supplier of various petrochemical products in China, today announced that it filed Form 12b-25 with the Securities and Exchange Commission on May 15, 2012 to extend the filing of the Company's Form 10-Q for the three months ended March 31, 2012 within the 5-day grace period.

The Company is unable to file its Form 10-Q for the three months ended March 31, 2012 in a timely manner because the compilation, dissemination and review of the information required to be presented in the Form 10-Q has imposed time constraints on the Company that have rendered timely filing of the Form 10-Q impracticable without undue hardship and expense to the Company.

The Company expects to report revenues of approximately $183.3 million based on sales of 157,854 MT of products during the three months ended March 31, 2012.

Fourth Quarter 2011 Results

• Sales for the fourth quarter ended December 31, 2011 were $164.4 million, an increase of $6.4 million, or 4% from the fourth quarter of 2010.
• Net loss attributable to common shareholders was $0.1 million for the fourth quarter of 2011, with diluted net loss per share of $0.00 compared to net income of $6.2 million and earnings per share of $0.11 in the fourth quarter of 2010.

Our 2011 revenues benefitted from solid customer demand and expanded production capacity," declared Mr. Chungfeng Tao, Chairman and Chief Executive Officer of Keyuan Petrochemicals Inc. "Although our margins were negatively impacted by higher raw materials costs, legal and administrative expenses related to the investigation, and 44 days of production interruptions; we generated positive cash flows, which allow us to continue funding our growth initiatives. With a series of initiatives on major projects and SBS facility entering into operation, I believe Keyuan's core earnings potential continues to improve."

Full Year 2012 Guidance

Management is forecasting $880 million of revenues, $30 million of net income and 760,000 MT of production for 2012. This assumes approximately $100 to $110 million of revenue and $10 to $11 million of net income contribution from its SBS production facility.

NINGBO, China, April 12, 2012 /PRNewswire-Asia-FirstCall/ -- Keyuan Petrochemicals, Inc. (OTCQB: KEYP) ("Keyuan or the "Company"), a leading merchant manufacturer of various petrochemical products in China, announced today that it has received a letter from NASDAQ regarding a permanent delisting of its stock. The Company's stock will continue to trade on OTC Markets under the ticker symbol "KEYP".

NASDAQ will file a Form 25 with the Securities and Exchange Commission to complete the delisting. The delisting becomes effective ten days after the Form 25 is filed.

"We are disappointed in NASDAQ's decision to delist our stock," stated Mr. Chungfeng Tao, Chairman and Chief Executive Officer of Keyuan Petrochemicals Inc. "Since we began trading on the NASDAQ, we have taken all measures to comply with NASDAQ's listing requirements. Upon completing our independent investigation in September of 2011, we have taken extensive measures to improve our internal controls and corporate governance. We firmly believe Keyuan is a stronger and more sustainable company than it has ever been. We remain committed to the U.S. capital markets and delivering value to our shareholders."

NINGBO, China, March 5, 2012 /PRNewswire-Asia-FirstCall/ -- Keyuan Petrochemicals Inc. (OTCQB: KEYP), ("Keyuan" or "the Company"), an independent manufacturer and supplier of various petrochemical products in China, today announced preliminary production results for the fourth quarter and full year 2011, which exceeded previously announced revenue and production guidance of $625.0 million and 570,000 MT, respectively. The Company also announced it has commenced operation of a 35-ton boiler at its petrochemical manufacturing facility as a means to reduce electricity costs for Keyuan while having a positive impact on the local environmental.

Preliminary 2011 Results:

The Company provided preliminary, unaudited production results for the fourth quarter and full year 2011:

The Company will report fourth quarter and full year 2011 results in mid-late March 2012. Additional information will be provided once the details have been finalized.

Keyuan brought online a 35-ton boiler that converts waste gas from its petrochemicals production to produce steam, which is then used to generate electricity. The new facility reduces energy consumption and unnecessary gas emissions. Additionally, the Company can reduce its dependence on outside sources for electricity and lower its costs by approximately $4.8 million per year.

"We constantly strive to be more efficient and environmentally friendly," stated Mr. Chunfeng Tao, Chairman and Chief Executive Officer of Keyuan Petrochemicals Inc. "As we gain more experience operating our production lines, we are finding diverse ways to increase our output and reduce our costs. This initiative coupled with the addition of higher margin products such as SBS, will help deliver greater overall margins for 2012."

NINGBO, China, February 22, 2012 /PRNewswire-Asia-FirstCall/ -- Keyuan Petrochemicals Inc. (OTCQB: KEYP), ("Keyuan" or the "Company"), an independent manufacturer and supplier of various petrochemical products in China, today announced that it has signed a long-term supplier agreement with Shell Petrochemicals Company Limited ("CSPC"), a joint venture between CNOOC and Royal Dutch Shell Group, to purchase butadiene, an essential raw material used in the production of Styrene-Butadiene-Styrene (SBS).

This year (2012) will be the first full year of commercial SBS production. In the past twelve months, the price for butadiene has ranged between approximate $2,144/t and $5,083/t, with current prices at approximate $4,765/t. The one-year agreement with CSPC ensures Keyuan has adequate supply of butadiene to meet its 70,000-ton SBS production target in 2012.

"This agreement provides important stability for one of our new business units," explained Mr. Chunfeng Tao, Chairman and Chief Executive Officer of Keyuan Petrochemicals Inc. "We have secured an adequate supply from a trusted partner and at a reasonable cost. Having recently secured strong orders for SBS, we can now focus on optimizing our production for the remainder of 2012."

CSPC is a joint venture between CNOOC and Shell Nahai BV, a subsidiary of the Royal Dutch Shell Group. With its butadiene production facilities located in Huizhou, Guangdong Province and annual production capacity of 165,000 metric tons of butadiene, CSPC can conveniently ship materials directly to Keyuan's production plants in Ningbo.

On January 10, 2012, Mr. Lei (“Michael”) Xu joined the Board of Directors of Keyuan Petrochemicals, Inc. (the “Company”) as an non-voting observer, effective immediately.

Mr. Xu is a general partner of Prax Capital, one of leading private equity firms with the investment focus in China. Prax Capital, through Dragon State International Limited, invested $20M in the Company in September 2010 and is the largest institutional shareholder of the Company. Prior to joining Prax Capital in 2003, Mr. Xu worked at New Margin Ventures, Kamsky Associates, Inc. and Deloitte & Touch. Mr. Xu has about 15 years experience in venture investment and business advisory in China. Mr. Xu holds an MBA from the Wharton School at the University of Pennsylvania and a law degree from Ningbo University in China.

On July 5, 2011, Keyuan Petrochemicals, Inc. (the “Company”) received a letter from The NASDAQ Stock Market (“NASDAQ”) indicating that based on its review of the Company and pursuant to NASDAQ Listing Rule 5101 and Listing Rule 5250 (c)(1), the NASDAQ staff (the “Staff”) has determined that “continued listing of the Company’s securities on The Nasdaq Stock Market is unwarranted.”

In accordance with the procedures set forth in the NASDAQ Listing Rules, the Company timely appealed the Staff determination, and requested a hearing before a Hearings Panel.

In response to questions raised concerning the Investigation Team’s interim report, referred to in the Company’s press release published on July 11, 2011 and included in its Interim Report on Form 8-K filed with the SEC on July 11, 2011, the Company would like to clarify the following points: (1) the final investigation has not been completed by the Investigation Team, (2) the Investigation Team was not in a position to determine that the Company's accounting for revenue from certain customers had been "accounted for appropriately," as these are determinations to be made by the Company and its independent auditors, (3) the interim report was issued by the Investigation Team to report its findings in connection with certain sales and customer transactions, neither Pillsbury, Deloitte, King & Wood nor the industry expert “separately verified the accuracy of information related to the Company's 2010 sales”, and (4) the Investigation Team made no determination in the interim report that the Company is on "solid financial footing."

NINGBO, China, July 12, 2011 /PRNewswire-Asia-FirstCall/ -- Keyuan Petrochemicals, Inc. (Nasdaq: KEYP) ("Keyuan or the "Company"), a leading merchant manufacturer of various petrochemical products in China, announced today that the audit committee has received initial findings of its independent investigation of the Company's 2010 sales and revenue. Deloitte Financial Advisory Services ("Deloitte"), King & Wood, Pillsbury Winthrop Shaw Pittman LLP ("Pillsbury") and a petrochemicals industry expert, separately verified the accuracy of information related to the Company's 2010 sales.

On March 31, 2011, the Company's audit committee hired Pillsbury, Deloitte, and King and Wood to conduct an independent investigation of issues identified by the Company's former independent public accountant, KPMG. A team of lawyers and forensic accountants reviewed scores of documents at Keyuan's offices, visited select customer locations throughout China, and interviewed representatives of the customers, and senior officers and personnel of the Company. The independent investigators also consulted an industry expert, who has years of experience in the petrochemicals industry, to analyze Keyuan's production plants and operations.

Based on results from the independent investigation, the independent investigators made the following conclusions:

1. "…nothing has come to our attention to indicate that the Company has inappropriately accounted for the specific customer transactions we were able to test, other than the documentation issues notes above";(1)

2. "the Company-arranged interviews with selected customers supported that the customers transacted business with the Company in 2010";

3. "in the documents that we have reviewed, we have found no documents reflecting any intent by the Company to misstate revenues;"

4. "plant visit and document review by an expert in the petrochemical industry supports the finding that the plant is operating and producing petrochemicals at a quantity consistent with the revenues stated by the Company"; and

5. "interviews with management and selected Company personnel were consistent with the above findings."

"We are pleased with the results of the independent investigation," stated Mr. Chungfeng Tao, Chairman and Chief Executive Officer of Keyuan Petrochemicals. "The findings support our assertion throughout this process that we are an excellent company on solid financial footing with a clear and focused growth strategy. Having cooperated fully with examiners and regulators during this extensive review process, we will continue to focus on completing our 2010 and 1H 2011 audits."

(1) Please refer to Form 8-K we filed on July 11, 2011 for further information

Shareholder Update:

Interim independent investigation completed. Results favorable: Company accounted for revenue properly

• Secured new auditor - GHP Horwath; will be compliant with regulatory filings as soon as possible

• Unaudited revenues of $292 million for the first six months ending June 30, 2011, representing 17% Y-O-Y growth

• Production and sales volume expected to increase in 2H 2011

• Cash dividend will continue - next distribution scheduled for July 15th

NINGBO, China, July 11, 2011 /PRNewswire-Asia-FirstCall/ -- Keyuan Petrochemicals, Inc. (Nasdaq: KEYP) ("Keyuan or the "Company"), a leading merchant manufacturer of various petrochemical products in China, announced today that it has received a letter from NASDAQ regarding a delisting of its stock based on the NASDAQ staff's review of the Company and pursuant to NASDAQ Listing Rule 5101 and Listing Rule 5250 (c)(1).

The Company has requested a hearing to appeal this decision and management is working diligently with all relevant authorities to regain compliance with its regulatory requirements.

Information regarding the Management conference call can be found below.

Mr. Chungfeng Tao, Chairman and Chief Executive Officer of Keyuan Petrochemicals, provided an update to shareholders regarding the Company's operations, investigation and corporate actions:

"We apologize to our shareholders for the challenges we have experienced over the past few months. While these issues have taken longer to resolve than we originally anticipated, I assure you that the entire board of directors and senior management team is cooperating with all parties, including NASDAQ, to come to an expeditious resolution. I am especially proud of our employees and operations managers, who have continued to do an excellent job running our business throughout this process. I would also like to thank the Audit Committee and CFO who have stood by us during this difficult time and worked to complete the investigation and audit.

"Demand for our products remains strong, and we continue to sign new customers. I look forward to resolving all pending issues as soon as possible. In the meantime, we welcome all investors to come visit our facilities to witness the tremendous progress we are making," Mr. Tao concluded.

On April 1, 2011, Keyuan filed for an extension of its 2010 10-K filing with the SEC after issues were raised by the independent auditor primarily related to certain cash transactions and recorded sales. The Audit Committee engaged the services of independent legal counsel, Pillsbury Winthrop Shaw Pittman LLP ("Pillsbury"), who in turn engaged the services of Deloitte & Touche LLP ("Deloitte"), a forensic accountant, and King & Wood, Audit Committee's legal counsel in PRC, to commence an investigation of the issues raised by the Registrant's auditors at the time, KPMG. While our new auditors, GHP Horwath, will commence work immediately we must first complete this independent investigation being carried out by Pillsbury, Deloitte and King & Wood before the 2010 audit can be completed. NASDAQ's notification to delist the Company's stock from the exchange is based primarily on the Company's inability to file audited financial statements on a timely basis, as well as issues raised by KPMG.

The Company has filed a request of an appeal to NASDAQ on the basis of Management's confidence that we will regain compliance with all regulatory requirements in a reasonable amount of time. In the event that the stay to delist is not granted, the Company's shares will continue to be listed on NASDAQ but trade on the OTC Pink beginning July 26, 2011 until the decision of the appeal is released.

Management has fully cooperated with Pillsbury, Deloitte and King &Wood to provide the information they have requested. The interim report of the Company's unaudited sales to certain customers in fiscal year 2010 provided by the investigative team found that the sales were accounted for appropriately. Once the full investigation is completed, the Company is confident that it will be able to regain compliance with the applicable securities laws.

New Auditor Secured

On July 5, Keyuan engaged GHP Horwath to be the Company's new auditor. GHP Horwath will begin to audit the Company's 2010 financial results immediately.

Business Updates

Keyuan continues to operate its business as usual and is executing the growth plan according to schedule.

• From January 1, 2011 to June 30, 2011, our unaudited revenue was $292 million, representing 17% growth over the same period last year. Market demand for our products remains strong.

• We completed our capacity expansion on time and on budget in April, 2011 and now have 720,000 metric tons of annual capacity. Due to the expanded capacity and strong market demand, we sold 113,971 metric tons (MT) products in the two months of May and June 2011, representing 4.2% growth over the same period last year. We expect sales volume to increase in the second half of the year as our newly expanded facility continues to ramp up production.

• Our next phase facility expansion is progressing well. The expansion of the storage facility and the addition of the raw material pre-treatment facility and asphalt facility are now in the final stage of approvals by the local authorities. The Styrene-Butadiene-Styrene ("SBS") production facility is progressing on schedule.

• Keyuan signed a joint technology development agreement with Hangzhou Zhongce Rubber Company to develop new commercial applications for a Solution Polymerization styrene Butadiene Rubber ("SSBR"). SSBR, which is a safer, more environmentally friendly raw material used primarily in tires, represents a new opportunity in a fast-growing market.

• We continue to enjoy strong support from the local government and banks in Ningbo, PRC. Our strong and growing businesses support the local economy through 437 employees we hired and the $164 million we have invested in infrastructure and land since breaking ground in 2008. Because we maintain a healthy balance sheet with no receivables and positive cash flows, the local banks continue to supply us with working capital loans to support our business.

Corporate Actions

The Board remains committed to paying a quarterly cash dividend. The dividend record dates for the distribution of the quarterly cash dividend of $0.09 per share for 2011 will be the first of March, June, September and December with payment dates on the fifteenth of April, July, October and January, or the following business day if the fifteenth of those months fall on Saturday or Sunday.

Separately, Prax Capital, who invested $20 million in our Company in September 2010, reiterated their commitment to Keyuan and our management team. "We are as confident as before on the management and business prospect of Keyuan," said by Michael Xu, a partner of Prax Capital, "I believe Keyuan will come out much stronger after the unfortunate special investigation and deliver fundamental value."

Mr. Tao concluded "In conclusion, I am deeply humbled by the collateral damage resulting from our short-term challenges. I want to personally thank our 437 dedicated employees and our shareholders for maintaining their trust in our management team through these difficult times. We are committed to assisting with the completion of this independent investigation and to regain reporting and listing compliance. Furthermore, we continue to grow our business through facility expansions and new customers. With the tremendous assets we have already built and a clear growth plan, I am confident we will generate significant shareholder returns."

NINGBO, China, July 6, 2011 /PRNewswire-Asia-FirstCall/ -- Keyuan Petrochemicals, Inc. (Nasdaq: KEYP) ("Keyuan or the "Company"), a leading merchant manufacturer of various petrochemical products in China, announced today that it has engaged GHP Horwath P.C., ("GHP Horwath") a member of Crowe Horwath International, as its new auditor. GHP Horwath will commence its work immediately with the audit of the Company's 2010 financial statements, which are to be included in the Company's 2010 Annual Report on form 10-K.

Mr. Chunfeng Tao, Chairman and Chief Executive Officer of Keyuan Petrochemicals stated, "After an extensive search process, we decided to engage GHP Horwath as our new auditor. As a member of a top 10 network of worldwide audit firms with extensive experience with U.S. and Chinese accounting standards, we believe GHP Horwath will provide us with quality audit services."

NINGBO, China, June 28, 2011 /PRNewswire-Asia-FirstCall/ -- Keyuan Petrochemicals, Inc. (Nasdaq: KEYP) ("Keyuan or the "Company"), a leading merchant manufacturer of various petrochemical products in China, today announced that KEYP and Hangzhou Zhongce Rubber Company Limited "Hangzhou Zhongce") have formally agreed to jointly develop commercial applications for Solution Polymerization Styrene Butadiene Rubber ("SSBR").

"This agreement is another example of our ongoing commitment to develop new products using our innovative technologies," began Chungfeng Tao, Chairman and Chief Executive Officer of Keyuan. "Hangzhou Zhongce is a proven leader in tire production with strong R&D capabilities. Sales of car tires worldwide were $140 billionin 2010(1), which is the largest user of SSBR today, especially for high gear radials. By engaging early in this technology, we expect to gain an advantage by developing commercial applications for SSBR in new markets and capitalizing on a significant growth opportunity."

Tires using SSBR are safer, more fuel efficient and have a lower environmental impact than existing products(2). The EU is encouraging the use of more environmentally friendly tires by enforcing stricter labeling requirements starting in November 2012(3). China is still in the early stage of applying SSBR into tire production, but the market prospect is promising.

Keyuan is working with researchers from Hangzhou Zhongce Rubber Company Limited to develop SSBR over the next several years. The Companies will share the rights to products and technologies developed from this cooperation. Upon successful development of SSBR, Keyuan will be able to produce this new product using the same facility of SBS (Styrene-Butadiene-Styrene) that is currently under construction.

On April 7, 2011, we received notice from Nasdaq stating that we are not in compliance with Listing Rule 5250(c)(1) for continued listing due to the fact that we have not yet filed our Form 10-K for the year ended December 31, 2010 by the due date of March 31, 2011 (extended to April 15, 2011 by Exchange Act Rule 12b-25).

As a result, to maintain our Nasdaq listing, we submitted a plan of compliance to the Exchange for an evaluation. If the plan is accepted, we may be able to continue our listing during the plan period up to October 12, 2011, during which time we will be subject to periodic review to determine if we are making progress consistent with the plan. If our plan is not accepted, or if our plan is accepted but we fail to make progress consistent with our plan, or we are not in compliance by October 12, 2011, we will be subject to delisting proceedings. Under Nasdaq rules, we have the right to appeal any determination by Nasdaq to initiate delisting proceedings.

On May 19, 2011, we received an additional notice from Nasdaq stating that we do not comply with Listing Rule 5250 (c) (1) for continued listing due to the fact that we have not yet filed our Form 10-Q for the three months ended March 31, 2011 on time. Nasdaq further stated in the notice that it will take this delinquency along with our previous failure to timely file the Form 10-K for fiscal year 2010 into the consideration when determining whether to delist the Company.

NINGBO, China, May 4, 2011 /PRNewswire-Asia-FirstCall/ -- Keyuan Petrochemicals, Inc. announced that is has successfully completed its capacity expansion.

The Company commenced the capacity expansion project on March 19th, 2011 and completed all equipment installation and testing by the end of April. Keyuan now has approximately 720,000 metric tons (MT) of annual production design capacity, up from 550,000 MT previously.

NINGBO, China, April 1, 2011 /PRNewswire-Asia-FirstCall/ -- Keyuan Petrochemicals, Inc. (Nasdaq: KEYP) today announced that it has not completed its 2010 consolidated financial statements by the March 31, 2011 deadline. The Company has applied for an extension with the SEC and is required to file the Annual Report by April 15, 2011.

Rodman and Renshaw on KEYP                    4/01/2011

KEYP: Rating Under Review

Company Announcement: KEYP announced today a delay in the filing of Form 10-K Annual Report, rescheduling of earnings call and a commencement of an independent investigation undertaken by the company’s audit committee into certain cash transactions and recorded sales. The audit committee has engaged Pillsbury Winthrop Shaw Pittman LLP as its independent legal counsel. Pillsbury Winthrop Shaw Pittman LLP will be responsible for retaining an independent accounting firm to assist it in the investigation. The filing of the Form 10-K will be delayed until the investigation is concluded. Consequently, management requested and was granted a trading halt from NASDAQ.

Management Comments: While KEYP management was not able to provide any further details at this time regarding the specific issues being investigated, we were assured that it is aware of the urgency of the matter and is fully cooperating with the audit committee to address the raised concerns. No specific timeline for the investigation and anticipated filing of the annual report could be provided as the pace of the inquiry will be determined by the audit committee. Management has also reiterated that it will pay its first quarterly dividend of $0.09 per share to the shareholders of record as of March 1, 2011 with the distribution occurring on April 15, 2011.

Rating Under Review: In light of today’s announcement and a halt in KEYP trading, we are placing our Market Outperform/Speculative Risk rating and $7 price target under review pending the resolution of the aforementioned issues and filing of the Form 10-K for FY10. We will continue to monitor company’s progress in addressing these issues and adjust our rating accordingly.

Company Description

Keyuan Petrochemicals, Inc. is a China based company that focuses on supplying primary and intermediate petrochemicals that serve as a base material for the production of many downstream petrochemical products used in construction, agriculture, automotive sector, consumer goods packaging and other applications. The company owns and operates a 550,000 MT petrochemical processing facility located in Qingshi Chemical Park in Ningbo, Zhejiang Province, PRC used primarily for the production of BTX aromatics, propylene, styrene, liquid petroleum gas (LPG), and methyl tertiary butyl ether (MTBE) and other petrochemical products. Patented multiple ethylene propylene (MEP) processing technology commercialized by Keyuan enables it to generate higher yields while using lower grade feedstock. Keyuan Petrochemicals is incorporated in Nevada and is listed on NASDAQ Global Market under the ticker symbol KEYP.

Notice Regarding Privacy and Confidentiality:

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

Rodman and Renshaw on KEYP                          2/10/2011

Initiating Coverage with a Market Outperform rating and $7 Price Target 

Investment Thesis 

We are initiating coverage on Keyuan Petrochemicals, Inc (KEYP) with a Market Outperform/Speculative Risk rating and a price target of $7. Keyuan is an emerging provider of primary and intermediate petrochemicals utilized in the production of resins, plastics, chemical fiber, coatings, paints and pesticides for automotive, consumer, real estate and agricultural end markets. A relative newcomer to the petrochemical industry, the company is quickly establishing itself as a major player in the sector through aggressive capacity expansion and commercialization of proprietary patented technology that enables cost-effective production of aromatics from cheaper and more readily available heavy oil instead of traditionally used naphtha. Trading at 9x FY10 fully diluted earnings the stock is relatively inexpensive given the company’s strong revenue growth and projected capacity expansion to over 1 million MT by the end of 2012. Overall, we believe Keyuan stands to benefit from the long-term economic growth in China which will fuel the demand for a variety of primary and intermediate petrochemicals.

Management guides for strong revenue growth in both FY10 and FY11, expecting revenues and net income of approximately $550 million and $36.3 million, respectively, on 660,000 MT sales in FY10 and revenues of $650.5 million on projected sales of 740,000 MT in FY11. We forecast revenues and adjusted net income of $550.1 million and $35.2 million (after preferred dividends) for FY10 and $654.1 million and $35.6 million in FY11, respectively, which translates to fully diluted adjusted EPS of $0.59 (including the effect of consumption tax rebate) in FY10 and $0.52 in FY11. We view the stock’s present valuation as attractive and recommend investors accumulate positions at current level.

Valuation 

We initiate on Keyuan with a Market Outperform/Speculative Risk rating and target price of $7, implying a 37% upside to the current price. Keyuan is currently trading at 9x our FY10 fully diluted EPS estimate of $0.59 (including the effect of consumption tax rebate) and 10x our FY11 fully diluted EPS estimate of $0.52. These multiples are below the current FY10 and FY11 industry averages of 18x and 14x for the U.S.- listed petrochemical companies and 26x and 19x for the Asia-listed petrochemical peer group. On EV/EBITDA basis, the stock is currently valued at 6.3x our FY11 forecasts. We believe the current valuation does not fully reflect the company’s technological advantages, rapid historical and projected revenue growth, increasing capacity and strong demand for its products. Our price target of $7 is based on the shares attaining a relatively conservative P/E level of 13x our FY11 fully diluted EPS estimate and 8x FY11 EV/EBITDA multiple.

Risks 

(1) Fluctuating feedstock prices (2) Effect of tighter monetary policies on major end markets (3) Execution risk (4) Liquidity (5) Dilution to existing shareholders.


Notice Regarding Privacy and Confidentiality:

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

NINGBO, China, Feb. 1, 2011 /PRNewswire-Asia/ -- Keyuan Petrochemicals, Inc. today announced that it has signed an agreement with Ningbo Institute of Technology, an affiliate of Zhejiang University, to jointly develop commercial applications for K-resin. This is one component of Keyuan's long-term strategy to invest in technology advancement.

Keyuan will work with researchers from the Ningbo Institute of Technology to research and develop synthesis technology for K-resin over the next 2 years. K-resin is a block co-polymer with excellent transparency and anti-impact properties, including flexibility and durability. It is currently used in packaging and plastic products such as medical instruments and toys. This partnership will focus on developing commercial applications for K-resin in synthetic rubber products. Keyuan and Ningbo Institute of Technology will share the rights to products and technologies developed from this cooperation.

NINGBO, China, Dec. 14, 2010 /PRNewswire/ -- Keyuan Petrochemicals, Inc. announced a plan to expand its design production capacity by approximately 30% from 550,000 to 720,000 metric tons (MT) per year.

"Our team designed our manufacturing facilities in order to balance time to market and operational efficiency," explained Chungfeng Tao, Chairman and Chief Executive Officer of Keyuan. "Initially, using our proprietary catalytic pyrolysis technology, the Company built a facility capable of producing 550,000 metric tons of petrochemicals per annum, serviced by heavy oil feedstock. Our flexible production process and design allow us to change the mix of feedstock to maximize production volumes, sales and profits. This attribute has enabled us to produce and sell approximately 482,000 MT of petrochemical products in the first three quarters of 2010, or 17% above the original 550,000 MT design capacity on an annualized basis."

Keyuan expects to spend approximately $3.8 million to upgrade the catalytic pyrolysis processing equipment used in its existing production facilities. The Company has started the design work and installation is scheduled to begin in March 2011. Once the installation and annual maintenance is completed by the end of the second quarter of 2011, Keyuan's design capacity will increase to 720,000 MT per year.

Financial Outlook for 2010

Management is expecting its full year 2010 guidance of approximately $550.0 million of revenues. This guidance assumes sales volume of 660,000 metric tons. The company's net income target is $36.3 million for the full year 2010, excluding public company expenses.

Management expects to generate approximately $650.5 million of revenue for the full year 2011. This assumes sales volume of 740,000 metric tons.

In order to develop our business to meet the increasing customer purchase orders, our management team has made plans to expand our manufacturing capacity to include an SBS production facility, additional storage capacity, a raw material pre-treatment facility and an asphalt production facility. The estimated cost of building the SBS facility is $17.5 million, and the estimated cost of the other three expansion plans is approximately $70 million including $20 million for facility construction, $40 million for new equipment and $10 million for working capital for the whole business. The estimates do not include the $5.8 million land purchased in August 2010.

We plan to be funded the aforementioned expansion projects through short-term borrowings, partial proceeds from the prior private financings, cash from operations and potential equity financing.

On September 28, 2010 in connection with a security purchase agreement between Keyuan Petrochemicals, Inc.  and the investors  closed a private placement of $20,250,000 from offering a total of 540,001 units at a purchase price of $37.5 per Unit, each consisting of,

(a) ten (10) shares of Series B convertible preferred stock of the Company.

(b) one and a half  three year Series C warrant (the “Series C Warrants”) to purchase one (1) share of Common Stock, at an exercise price of $4.50 per share, and

(c) one and a half three year Series D warrant (the “Series D Warrants,” together with the Series C Warrants collectively hereinafter referred to as “Warrants”) to purchase one  share of Common Stock, at an exercise price of $5.25 per share (the “Private Placement”) in reliance upon the exemption from securities registration afforded by Regulation S  as promulgated under the Securities Act of 1933.

Second Quarter 2010 Financial Results:

• Revenue totaled $132.0 million. The Company had no revenue in the quarter ended June 30, 2009, having commenced production in October 2009.
  
• Net income was $4.9 million vs. a loss of (841,408).
  
• EPS was $0.11.

"Our performance during the second quarter of 2010 reflects continued strong demand for our products," stated Mr. Chunfeng Tao, founder, chairman and chief executive officer of the Company. "With a healthy backlog and a clear growth strategy, we are doubling our storage capacity from 100,000 tons to 200,000 tons, building a raw material pre-treatment facility and an asphalt production facility in order to meet growing customer demand. Once completed, our new facilities will allow us to reduce raw material costs, improve production yield and maximize profits from all stages of production. We also believe this expansion will position Keyuan to achieve significant growth in cash flows and profits and establish ourselves as a leading producer of refined petrochemical products in China."

Dilution may be in the cards:

The Company also plans to double its storage capacity to 200,000 MT by the end of 2011 and to add a new raw material pre-treatment facility and an asphalt production facility in 2012. The total cost of the expansion is projected to be approximately

• $78 million including $8 million for purchasing land.
• $20 million for facility construction.
• $40 million for new equipment.
• $10 million for working capital.

We expect to fund expansion with cash on hand, bank loans, cash flows generated by our business and potential equity financing.

"We are pleased with our performance during the first quarter of 2010, as we continued to capitalize on China's growing demand and supply imbalance for refined petrochemical products," stated Mr. Chunfeng Tao, founder, chairman and chief executive officer of the Company. "This growing demand, which has surpassed supply in recent years, has led to record contract signings and backlog for Keyuan's various products. To meet this order backlog and customer demand, we are expanding our production and storage capacity in order to deliver additional tonnage of industry leading products to our customers in China. Like our current production facilities, this expansion will include manufacturing technologies that enable us to achieve above-industry-average margins by reducing raw material costs and increasing utilization rates and yields. As a result, we believe we are well-positioned to drive

Financial Outlook for 2010 For fiscal year 2010,

• Revenue of approximately $461.3 million
• Net income of approximately $36.3 million, excluding public company expenses.
• Gross margins are expected to improve to 12%
• Net margins expected to improve to 8.0%.

This guidance assumes average annual sales volume of 550,000 MT of refined petrochemical product sales in 2010.

Financial Outlook for 2011 For fiscal year 2011

• Revenue of approximately $518.2 million
• Net income of approximately $48.2 million, excluding public company expenses.
• Gross margins are expected to improve to 13.0%, with net margins expected to improve to 9.0%. This guidance assumes average annual volume of 600,000 MT of refined petrochemical product sales in 2011

Keyuan International Group Limited completes reverse merger and Simultaneous private placement, effective April 22, 2010.

Company Snapshot: 

A leading independent manufacturer and supplier of various petrochemical products in China.

Shares Count:

As a result of this placement, the Company now has 50,661,562 shares of common stock issued and outstanding (assuming Series M shares are fully converted), 5,954,058 shares of preferred stock outstanding (convertible into the same number of shares of common stock), and warrants outstanding exercisable for an aggregate of 1,958,224 shares of common stock including placement agent warrants.

Financial Snapshot: (Began generating revenues in October of 2009).

• For fiscal year 2010, the Company expects to generate revenue of $461.3 million.
• For fiscal year 2010, the Company expects to generate net income of $36.3 million. excluding public company expenses.
• Implied 2010 EPS: $0.72 .