Key investment points:
Market review. As of December 10, 2021, Shenwan chemical industry rose 0.42% this week, underperformed the CSI 300 index by 2.73 percentage points, and ranked 16th among Shenwan 28 industries.
As for the six sub sectors of Shenwan chemical industry, according to the performance of the recent week, the increases are rubber (+ 2.79%), chemicals (+ 0.94%), petrochemical (+ 0.58%), chemical fiber (+ 0.40%), chemical raw materials (- 2.07%) and plastics (- 2.12%).
Among the stocks with the highest gains this week, Shanghai Nar Industrial Co.Ltd(002825) , Yueyang Xingchang Petro-Chemical Co.Ltd(000819) and Shenzhen Wote Advanced Materials Co.Ltd(002886) performed best, with gains of 31.57%, 22.69% and 21.82% respectively. Among the stocks with the highest decline this week, Shandong Fengyuan Chemical Co.Ltd(002805) , Anhui Huaheng Biotechnology Co.Ltd(688639) and Zhejiang Hailide New Material Co.Ltd(002206) performed the worst, with declines of – 17.29%, – 14.76% and – 12.87% respectively.
In terms of valuation, as of December 10, the Pb of Shenwan chemical sector was 3.17 times, at the quantile of 94.14% in recent five years and 90.82% in recent ten years.
Zhou’s view of the chemical industry: Recently, the high level of China’s chemical price index has fallen, and the increase of production capacity in subsequent industries may further put pressure on the price and price difference of chemical products. We suggest to follow up on the middle and lower reaches of the industry: (1) the tire industry whose fundamentals are expected to improve gradually; (2) the tackling of air pollution control in autumn and winter and the Winter Olympic Games will put pressure on the pesticide supply side, and the prices of some pesticide products are expected to remain strong; (3) the modified plastic industry whose profitability is expected to improve if the upstream price continues to decline; (4) New energy upstream chemical materials with high demand certainty, such as PVDF and photovoltaic EVA particles; (5) sweetener leader Anhui Jinhe Industrial Co.Ltd(002597) with increased product price and reasonable current valuation. Key target concerns:
Tires: Shandong Linglong Tyre Co.Ltd(601966) (601966), Qingdao Sentury Tire Co.Ltd(002984) (002984), and Sailun Group Co.Ltd(601058) (601058)
Pesticide: Jiangsu Yangnong Chemical Co.Ltd(600486) (600486)
Modified plastics: Kingfa Sci.& Tech.Co.Ltd(600143) (600143), Shanghai Pret Composites Co.Ltd(002324) (002324)
PVDF： Lecron Industrial Development Group Co.Ltd(300343) （300343）
PV EVA: Jiangsu Eastern Shenghong Co.Ltd(000301) (000301), Levima Advanced Materials Corporation(003022) (003022)
Sweetener: Anhui Jinhe Industrial Co.Ltd(002597) (002597)
Risk warning: downstream demand is less than expected; Product price and price difference fall; Intensified industry competition, etc
