Key investment points:
This week, the prosperity index of Guohai chemical industry was 170.65, up 2.18 month on month, another record high since 2008. Comprehensively consider the operation and prosperity of chemical enterprises, and give the industry a “recommended” rating.
Investment suggestion: leading enterprises usher in the period of strategic layout.
With the price of Brent crude oil exceeding $95 / barrel, it is expected to impact $100 / barrel. Combined with the rebound of demand in the beginning of spring, the price of chemical products has ushered in a general rise. The prosperity index of Guohai chemical industry monitored by us has reached a record high since 2008. We believe that at the current time, leading enterprises in the chemical industry have entered the period of strategic layout. From the perspective of lengthening history, the prosperity of the chemical industry has rebounded since 2016. From the perspective of the large capacity cycle, it is still in the upward period of the capacity cycle. The supply side reform plays a key role in suppressing the capacity expansion, while the demand side fluctuations have brought periodic inventory cycle fluctuations, such as the price decline caused by the decline in demand from the second half of 2018 to the beginning of 2019, The decline caused by covid-19 epidemic in early 2020 and the decline in demand caused by real estate impact in the second half of 2022. However, from the supply side, the capital expenditure of the overall chemical listed companies is still limited by policies and cannot be released smoothly. The final result is that the profit center of chemical products continues to rise, and the net interest center of almost major chemical leading enterprises gradually rises. At the current time point, China’s stable economic policy continues to increase, the decline in China’s demand is expected to gradually ease, the foreign covid-19 epidemic prevention policy is gradually relaxed, and the demand is rising again. However, under the dual carbon background, the capital expenditure of the global chemical industry is still suppressed, and the prosperity of the chemical industry is expected to continue to rise. From the perspective of quantity, with the introduction of China’s stable economic policy, some policies previously restricting the capital expenditure of leading enterprises are expected to be adjusted. It has been seen that the energy consumption of raw materials does not occupy the energy consumption index, the probability of new production capacity of leading enterprises being approved this year has increased, and the long-term growth expectation has reappeared, but the capacity expansion of the whole industry is still suppressed. In 2021, some leading chemical enterprises have recalled some share prices. From the perspective of three years, the profits of leading chemical enterprises are expected to enter the growth track again and usher in a good opportunity for layout.
At the same time, the loss of profits in downstream industries due to high raw material costs will be alleviated and prices will be gradually transmitted to the downstream. The new material industry will be driven by new energy and emerging industries and usher in a good opportunity for development. Wanhua Chemical Group Co.Ltd(600309) has entered a period of rapid expansion. We believe that the core means to achieve the goal of carbon peak and carbon neutralization in the chemical industry is to use technological innovation to bring changes in energy structure, energy consumption level, raw material structure and product structure. Technological innovation is the key, and innovation can continue to grow. The R & D cost of Wanhua Chemical Group Co.Ltd(600309) in the third quarter of 2021 reached 930 million yuan, The construction in progress is 28.1 billion yuan, accounting for 46% of the fixed assets, of which the cash inflow of fixed assets purchased and constructed in the third quarter reached 7.6 billion yuan, reaching a record high. According to the environmental impact assessment, Wanhua Fujian Industrial Park plans to expand the MDI project to 1.6 million tons / year (Wanhua isocyanate company), and the TDI project to 360000 tons / year (Wanhua Fujian), Wanhua Chemical Group Co.Ltd(600309) enters the rapid expansion period. We expect that 10000 tons of ternary battery materials and 60000 tons of biodegradable polyester materials will be put into operation in 2022, bringing new catalysts. Under the dual carbon background, Wanhua Chemical Group Co.Ltd(600309) MDI, as an excellent thermal insulation material, is expected to usher in a period of demand explosion. Moreover, due to its R & D and innovation ability, the company can expand its capacity and worry free growth, so Wanhua Chemical Group Co.Ltd(600309) is recommended. Private refining ushered in a good opportunity for development. The prosperity of large-scale refining and chemical projects itself is at the middle and lower level in history. At present, it is gradually extending to the downstream. A series of new chemical material projects are expected to be implemented and the growth capacity will rise again. Enterprises such as Hengli Petrochemical Co.Ltd(600346) , Rongsheng Petro Chemical Co.Ltd(002493) , Jiangsu Eastern Shenghong Co.Ltd(000301) , Hengyi Petrochemical Co.Ltd(000703) , Tongkun Group Co.Ltd(601233) , Xinfengming Group Co.Ltd(603225) are mainly recommended. Satellite chemical phase I ethylene project is gradually put into operation. The route of importing low-cost ethane from the United States to produce low-carbon olefins has been opened. The company is expected to continue to expand production capacity and expand downstream with low-cost raw materials, which deserves special attention.
The leading development of coal chemical industry has ushered in a turnaround. With the relaxation of raw material energy consumption policy, the coal chemical projects blocked in the early stage are expected to be implemented, and the growth of enterprises such as Shandong Hualu-Hengsheng Chemical Co.Ltd(600426) , Ningxia Baofeng Energy Group Co.Ltd(600989) , Luxi Chemical Group Co.Ltd(000830) is prominent. The tire industry has entered the strategic layout period. We judge 2021q3 as the lowest point of the industry. In 2021q4 and 2022q1, the profits of the tire industry began to improve. Based on three judgments, first, the supply contracted and the small and medium-sized tire enterprises began to shut down. According to the data of Zhuo Chuang information, on February 10, 2022, the operating rate of Shandong semi steel tire enterprises was 20.5%, and the operating rate under normal conditions was about 70%, The operating rate of Shandong all steel tire enterprises is 8.6%, which is more than 70% under normal circumstances. Dual control and negative cash flow are two reasons, especially the net operating cash flow of some listed companies in the second quarter of 2021 has turned negative; Second, the price of sea freight has been loosened. This week, the FBX index from China to the western US port was US $15217.6/feu, down 1.73% from last week; The FBX index from China to Meidong port was US $16475.2/feu, down 0.22% from last week; Third, in December 2021, China’s monthly output of commercial vehicles was 380000, an increase of 7.7% month on month, the output of automobiles was 2.91 million, an increase of 12.5% month on month, and the output of trucks was 331000, an increase of 6.9% month on month. The bottom of the tire is reversed. Under the background of supply contraction and demand improvement, according to incomplete statistics of China tire commercial WeChat official account, 15 tire enterprises announced the price increase in 2022. Overall, the price increase of this round is more than 2%-5%, and the highest increase is 10%. Nine tire enterprises in foreign markets have announced price increases, with a maximum price increase of 16%. We believe that the profit margin level of tires will gradually recover. In the long run, Chinese tire enterprises have outstanding cost performance advantages in the middle and low-end market. The high-end market realizes import substitution through channel strength. The two major trends of internationalization and branding are irreversible. It is recommended that Shandong Linglong Tyre Co.Ltd(601966) , Sailun Group Co.Ltd(601058) , Qingdao Sentury Tire Co.Ltd(002984) . These three enterprises have a significant expansion of overseas production capacity in 2022, as well as rubber additive enterprises Shandong Yanggu Huatai Chemical Co.Ltd(300121) and conveyor belt enterprises Zhejiang Double Arrow Rubber Co.Ltd(002381) .
The prosperity of phosphorus chemical industry is sustainable, and the transformation of new energy is in progress. The price of phosphate rock continued to rise, from 350 yuan / ton at the end of 2020 to 627.5 yuan / ton at present, an increase of 79%; The wet industrial monoammonium in Southwest China was adjusted from 5300 yuan / ton on September 23, 2021 to 5600 yuan / ton on February 11, 2022, and reversed upward again; The price of yellow phosphorus was adjusted back to 31000 yuan / ton, up 30% from 23500 yuan / ton in August 2021; Enterprises with industrial chain integration will benefit. In addition, the export volume of monoammonium phosphate, diammonium phosphate and compound fertilizer decreased significantly in August 2021, and the export was limited. As a compound fertilizer industry with squeezed terminal profits, the profits gradually improved.
In the first half of 2022, Xinyangfeng Agricultural Technology Co.Ltd(000902) and Guizhou Chanhen Chemical Corporation(002895) iron phosphate will be put into operation, and the phosphorus chemical industry chain is still in the transition period from traditional chemical fertilizer industry to new energy materials. We mainly recommend phosphorus chemical enterprises with industrial chain integration and fast transformation speed, including Xinyangfeng Agricultural Technology Co.Ltd(000902) , Guizhou Chanhen Chemical Corporation(002895) , Chengdu Wintrue Holding Co.Ltd(002539) , Yunnan Yuntianhua Co.Ltd(600096) , Hubei Xingfa Chemicals Group Co.Ltd(600141) , Shenzhen Batian Ecotypic Engineering Co.Ltd(002170) , Hubei Yihua Chemical Industry Co.Ltd(000422) , Shanghai Zhongyida Co.Ltd(600610) and other enterprises. Shanghai Zhongyida Co.Ltd(600610) merger draft has been released.
At the same time, Jiangsu Yangnong Chemical Co.Ltd(600486) with the sharp rise in the price of Kungfu pyrethrin, Anhui Jinhe Industrial Co.Ltd(002597) with the continuous rise in the price of sugar substitutes, Shandong Sinocera Functional Material Co.Ltd(300285) and Valiant Co.Ltd(002643) that can still maintain the performance growth under the pressure of the rise in the price of raw materials, and Lb Group Co.Ltd(002601) expanding to new energy materials are recommended.
Chemical industry leaders are the kings of the future. According to our observation, there are a number of leading companies in China’s chemical industry. Compared with international competitors, they show obvious efficiency advantages in terms of rate of return, labor efficiency and turnover. The slowdown of China’s GDP growth and the control of carbon emissions in the future have led to the concentration of resources in all aspects to the leading chemical enterprises, superimposed with intelligent manufacturing, R & D and innovation, and the increase of the leading market share is accelerating. At present, we believe that China’s leading companies have the ability to plan a global blueprint and move towards global leaders. We suggest that we should work with excellent enterprises and invest in those enterprises with efficient execution. This efficient ability will make the profitability of Chinese enterprises higher than that of international competitors, with higher rate of return and larger scale in the future. Therefore, the market value of foreign giants is far from the ceiling of Chinese enterprises. For example, Wanhua Chemical Group Co.Ltd(600309) , which is building an integrated industrial chain, continuously increasing R & D investment, multi category expansion and moving towards a first-class chemical new material company with global operation, has made a synchronous breakthrough in original replacement, China and foreign countries go hand in hand, and is aiming at the top five Shandong Linglong Tyre Co.Ltd(601966) in the global tire industry in 2030, with high starting point, high standard Build Hengli Petrochemical Co.Ltd(600346) and Rongsheng Petro Chemical Co.Ltd(002493) of world-class refineries with high efficiency.
We focus on the leaders in various sub sectors that are still undervalued, such as Wanhua Chemical Group Co.Ltd(600309) , the leader in the tire industry Shandong Linglong Tyre Co.Ltd(601966) , as well as Sailun Group Co.Ltd(601058) and Qingdao Sentury Tire Co.Ltd(002984) , private refining giants ( Hengli Petrochemical Co.Ltd(600346) , Rongsheng Petro Chemical Co.Ltd(002493) , Jiangsu Eastern Shenghong Co.Ltd(000301) , Tongkun Group Co.Ltd(601233) , Hengyi Petrochemical Co.Ltd(000703) , Xinfengming Group Co.Ltd(603225) ), the leader in the field of compound fertilizer Xinyangfeng Agricultural Technology Co.Ltd(000902) and Chengdu Wintrue Holding Co.Ltd(002539) , the leader in rubber additives Shandong Yanggu Huatai Chemical Co.Ltd(300121) Viscose staple fiber faucet Tangshan Sanyou Chemical Industries Co.Ltd(600409) , vitamin faucet Zhejiang Nhu Company Ltd(002001) , coal chemical faucet Shandong Hualu-Hengsheng Chemical Co.Ltd(600426) , new coal chemical faucet Ningxia Baofeng Energy Group Co.Ltd(600989) , pesticide faucet Jiangsu Yangnong Chemical Co.Ltd(600486) , glufosinate faucet Lier Chemical Co.Ltd(002258) inorganic new material faucet Shandong Sinocera Functional Material Co.Ltd(300285) , satellite chemistry in C2 / C3 field, sweetener faucet Anhui Jinhe Industrial Co.Ltd(002597) , plant growth regulator faucet Sichuan Guoguang Agrochemical Co.Ltd(002749) , titanium dioxide faucet Lb Group Co.Ltd(002601) Spandex and adipic acid leaders Huafon Chemical Co.Ltd(002064) , organic fine chemicals leaders Valiant Co.Ltd(002643) , dicamba enterprises Jiangsu Changqing Agrochemical Co.Ltd(002391) , oil chemical leaders Zanyu Technology Group Co.Ltd(002637) , etc.
The US Department of Commerce issued a statement on May 15, 2020 local time, saying that the strategic position of semiconductor materials has become increasingly prominent by comprehensively restricting Huawei’s purchase of semiconductors produced with us software and technology. It is suggested to pay attention to Rayitek Hi-Tech Film Company Ltd.Shenzhen(688323) , Jiangsu Yoke Technology Co.Ltd(002409) , Jingrui shares, Changzhou Tronly New Electronic Materials Co.Ltd(300429) , Jiangyin Jianghua Microelectronics Materials Co.Ltd(603078) , Zhejiang Juhua Co.Ltd(600160) , Haohua Chemical Science & Technology Corp.Ltd(600378) , Hubei Dinglong Co.Ltd(300054) and other enterprises. In addition, we hope that the new materials will continue to expand continuously, and have strong technical content of polymer anti-aging leader Rianlon Corporation(300596) , thermoplastic elastomer head Shandong Dawn Polymer Co.Ltd(002838) , brine extraction lithium technology leader Sunresin New Materials Co.Ltd Xi’An(300487) .
Industry price trend according to wind, as of Friday, Brent and WTI futures prices closed at US $95.1 and US $93.9 / barrel respectively, 2.79% and 2.15% mom. Although the US Iraq negotiations released positive signals this week, the EIA inventory fell more than expected, boosted by supply concerns caused by severe cold weather, and crude oil prices rose in shock. In the early part of the week, snowstorms and severe cold weather in the United States raised concerns about the shutdown of the Permian Basin, the largest shale oil producing area, superimposed geopolitical tensions, boosted crude oil, and international oil prices continued to rise. Later in the week, the US Iraq negotiations released positive signals, leading to the possible lifting of sanctions on oil sales in Iraq, offsetting concerns about tight supply. At the same time, tensions in Ukraine eased. However, data released by the US EIA showed that US crude oil and gasoline inventories were unexpectedly lower than expected, supporting oil prices, which fell first and then rose.
Risk tips: macroeconomic changes; Oil price fluctuation; Environmental protection and relaxation; The economy fell sharply; The product price fluctuates greatly; Focus on the company’s performance does not meet expectations.
