Event:
At 9 a.m. on March 5, the fifth session of the 13th National People’s Congress opened in the Great Hall of the people. Premier Li Keqiang delivered a government work report. The report pointed out that the whole country worked together in 2021, the main objectives and tasks of the whole year were well completed, the 14th five year plan achieved a good start, and China’s development made new and major achievements. At the same time, the report also provides comprehensive guidance for the work content of governments at all levels in 2022. This paper will focus on the six key points of government investment in food, neutralization, special effects and vaccine security, and provide special suggestions on food security, special effects and drug security.
Key points and comments of the work report:
Energy security: (1) ensure food and energy security. (2) Ensure the people’s livelihood and the normal production and operation of enterprises. (3) We will strengthen China’s capacity to guarantee resource production, accelerate the exploration and development of oil, gas, minerals and other resources, improve the national strategic material reserve system, and ensure the supply of primary products. (4) We will build key water conservancy projects, a comprehensive three-dimensional transportation network, important energy bases and facilities, and speed up the renewal and transformation of urban gas pipelines and other pipe networks. This government work report further emphasizes the issue of national energy security, focuses on Strengthening China’s resource production guarantee capacity, accelerating the exploration and development of oil, gas, minerals and other resources, and emphasizes ensuring national energy security at the energy supply side. Since 2021, Petrochina Company Limited(601857) , China Petroleum & Chemical Corporation(600028) , and CNOOC have made solid progress in the “seven-year action plan” and made a series of major breakthroughs in the exploration field. Among them, Petrochina Company Limited(601857) has proved a 1 billion ton shale oil packaged oilfield in Qingcheng area of Inner Mongolia Eerduosi Resources Co.Ltd(600295) basin, becoming the largest shale oil field with the largest proved reserves in China at present China Petroleum & Chemical Corporation(600028) increased risk exploration in new areas, made new discoveries in key basins, and found 200 million ton oil and gas areas in Tarim Basin; CNOOC obtained high-yield gas flow in the test of Baodao 21-1 structure in the South China Sea, initially showing the prospect of 100 billion cubic meters of natural gas reserves. We believe that under the background that the supply and demand of crude oil will remain tight in 2022, combined with the uncertainty of oil and gas supply caused by the recent geopolitical conflict between Russia and Ukraine, China’s large oil enterprises assume the responsibility of national energy supply, continuously strengthen oil and gas exploration and improve resource endowment, which is expected to benefit from the current market pattern, At the same time, it will also be conducive to the development of Chinese oil service enterprises.
Environmental resources protection: (1) strengthen the comprehensive management of ecological environment. We will deepen the fight against pollution. (2) We will strengthen the coordinated control of multiple air pollutants and regional coordinated governance, strengthen the remediation of pollution in important rivers, lakes and bays, and continue to promote the prevention and control of soil pollution. (3) We will strengthen the treatment of solid waste and new pollutants, and promote waste classification, reduction and recycling. (4) We will improve support policies for environmental protection industries such as energy and water conservation and recycling of waste materials.
The government work report pointed out that in the future, we will strengthen the comprehensive treatment of the environment and strengthen the control and treatment of air pollution, water pollution and soil pollution. Due to its high pollution and energy consumption, the chemical industry is subject to strict environmental protection supervision and intensive promulgation of relevant policies. In July 2020, Petrochina Company Limited(601857) and the guidelines for the 14th five year plan for the petrochemical and chemical industry issued by the Chemical Industry Federation pointed out that during the 14th Five Year Plan period, the industry will continue to implement the development concept of innovation, coordination, green, openness and sharing, and adhere to the basic national policy of saving resources and protecting the environment. With the gradual tightening of the insurance policy, the environmental protection costs faced by small and medium-sized enterprises in the industry are gradually increasing due to the difficulty of reaching the standard of production capacity and the old equipment and technology, and the operation difficulty continues to increase. They are being accelerated and cleared out by the market. In the future, it is easier for large enterprises to obtain the approval of new production capacity. It is expected that the industry concentration will continue to rise, and the leading enterprises will benefit significantly.
Carbon neutralization: (1) orderly promote carbon peaking and carbon neutralization. (2) Strengthen the clean and efficient utilization of coal, orderly reduction and substitution, and promote the transformation of energy conservation and carbon reduction, flexibility and heating of coal and electricity. Promote the planning and construction of large-scale wind and solar power bases and their supporting regulatory power sources, and improve the consumption capacity of the power grid for renewable energy power generation. (3) Promote the R & D, promotion and application of green and low-carbon technologies, build a green manufacturing and service system, and promote energy conservation and carbon reduction in iron and steel, nonferrous metals, petrochemical, chemical, building materials and other industries. (4) Promote the transformation from “dual control” of energy consumption to “dual control” of total carbon emission and intensity, improve the incentive and restraint policies for pollution and carbon reduction, and accelerate the formation of a green production and lifestyle. (5) Continue to support the consumption of new energy vehicles.
According to the government work report, in the future, China will orderly promote carbon peak and carbon neutralization, and continue to promote the application of renewable energy such as wind, solar and power. Among them, in terms of wind power, by the end of 2021, China’s installed capacity of wind power had exceeded 300 billion kw, double that at the end of 2016. In the future, under the background of favorable policies in many aspects, it is expected that the installed capacity of wind power will still maintain a high growth rate. With the continuous expansion of wind power installed capacity and the increase of unit use of relevant materials, a series of wind power related materials such as carbon fiber, epoxy resin and polyether amine will bring huge industry opportunities.
In terms of photovoltaic industry, under the background of “double carbon”, the state has launched a number of policies and measures to guide and encourage the development of photovoltaic industry. By the end of 2021, the installed capacity of grid connected photovoltaic power generation in China had reached 306 million KW. In 2021, the installed capacity of photovoltaic power generation increased by 54.93 million KW, and the new installed capacity of photovoltaic power generation in a single year reached a record high. With the rapid development of the photovoltaic industry, the demand for a series of basic raw materials such as polysilicon, EVA, PVDF and soda ash will increase significantly. With the continuous expansion of the production capacity of leading enterprises, industry leading enterprises are expected to further create greater profits.
In addition, the government work report clearly pointed out that it will continue to support the consumption of new energy vehicles, and it is expected that the penetration rate of Shanxi Guoxin Energy Corporation Limited(600617) vehicles will maintain a good growth trend in the future, thus continuously promoting the rapid increase of the demand for relevant materials in the lithium battery industry chain. We always believe that although there are many capacity plans for relevant lithium battery materials, due to the increased uncertainty and difficulty of project approval and the cycle of capacity climbing, relevant lithium battery materials will remain tight in the medium and short term, and lithium battery material enterprises with first mover advantage and cost advantage will have stronger industry competitiveness under this background.
Food security and stable supply and price of chemical fertilizer: (1) strengthen the guarantee of stable production and supply of grain and other important Shenzhen Agricultural Products Group Co.Ltd(000061) products. (2) We will ensure the supply and price stability of agricultural materials such as chemical fertilizers, redistribute agricultural subsidies to grain farmers, and increase support for major production areas. Farmers have reasonable benefits from growing grain, and there is an internal driving force for grasping grain in major production areas. (3) Firmly hold the red line of 1.8 billion mu of cultivated land, fully delimit permanent basic farmland, effectively curb the “non-agricultural” of cultivated land and prevent the “non grain” of cultivated land.
Since the covid-19 epidemic appeared in early 2020, governments around the world have paid more attention to food security, which has led to the continuous increase in the prices of relevant food products. At present, the prices of major food crops such as soybeans and corn have reached a record high. This government work report focuses on food safety and proposes that all parties should work together to fill the “rice bag” and enrich the “vegetable basket” and firmly hold the rice bowl of more than 1.4 billion Chinese people in their own hands.
The chemical fertilizer industry is an important support for stabilizing agricultural production. In order to strengthen food safety, the report points out that the supply and price stability of agricultural materials such as chemical fertilizer will be guaranteed. In the context of policies to ensure the stable supply of chemical fertilizer products, it is expected that the demand for chemical fertilizer products will remain strong, which is conducive to the sustained and steady development of relevant companies in the field of chemical fertilizer.
Specialization and Innovation: (1) promote scientific and technological innovation, promote industrial optimization and upgrading, break through the blocking point of supply constraints, and rely on innovation to improve the quality of development. (2) We will implement the three-year plan for tackling key problems in the reform of the science and technology system, strengthen the national strategic science and technology force, give full play to the role of national laboratories and national key laboratories, promote the reform of scientific research institutes, and improve the approval and management of major science and technology projects. (3) Implement the national strategic emerging industry cluster project. Focus on cultivating “specialized and special new” enterprises, and give strong support in terms of capital, talents and incubation platform construction. (4) We will strengthen the implementation of the policy of additional deduction of R & D expenses, increase the proportion of additional deduction of scientific and technological small and medium-sized enterprises from 75% to 100%, implement tax incentives for enterprises to invest in basic research, and improve policies such as accelerated depreciation of equipment and instruments and income tax incentives for high-tech enterprises.
The government work report pointed out that it will focus on cultivating “specialized and special new” enterprises and give strong support in terms of capital, talents and incubation platform. In September 2021, the Beijing stock exchange was established to build a wider range of financing channels for innovative small and medium-sized enterprises. With the gradual easing of financing constraints and the gradual inclination of various policies, it is expected that Chinese small and medium-sized enterprises will gain long-term development momentum. The government work report also pointed out that the implementation of the policy of adding and deducting R & D expenses will be strengthened, and the proportion of adding and deducting scientific and technological small and medium-sized enterprises will be increased from 75% to 100%, which will further alleviate the financial constraints of scientific and technological small and medium-sized enterprises and significantly promote their R & D investment.
Research and development of vaccines and specific drugs: accelerate the research and development of vaccines and specific drugs, and continue to do a good job in vaccination.
In the context of the normalization of epidemic prevention and control, the government work report puts forward requirements for the research and development of vaccines and specific drugs, pointing out the need to accelerate the research and development of vaccines and specific drugs and continue to do a good job in vaccination. With the accelerating R & D process of covid-19 specific drugs, there will be a broad demand for relevant upstream raw materials. Among them, azabicycl is an important pharmaceutical intermediate and an important raw material used in the synthesis of many drugs, such as hepatitis C protease inhibitor boceprevir and oral medication for covid-19 virus (pf-07321332), Companies with relevant production capacity will benefit significantly in the future. On February 11, 2022, the State Intellectual Property Office announced the invention patent application of Zhejiang Nhu Company Ltd(002001) a new method for the preparation of azabicyclic pharmaceutical intermediates. At present, the EIA report of the production projects of “Kalon anhydride” and “azabicyclic anhydride” of Zhejiang Nhu Company Ltd(002001) wholly-owned subsidiary has passed the government review and been filed. It is expected that the company’s future revenue will have great growth elasticity.
Investment suggestions:
(1) promote the energy security strategy. The policy emphasizes ensuring energy security from the supply side. Large oil enterprises Petrochina Company Limited(601857) , China Petroleum & Chemical Corporation(600028) , CNOOC with strong exploration ability and good resource endowment will significantly benefit; The capital expenditure of upstream energy enterprises has increased. It is suggested to pay attention to China Oilfield Services Limited(601808) , Offshore Oil Engineering Co.Ltd(600583) , Cnooc Energy Technology & Services Limited(600968) , Sinopec Oilfield Service Corporation(600871) and Bomesc Offshore Engineering Company Limited(603727) .
(2) with stricter environmental protection policies and higher industrial concentration, the chemical industry leader is expected to further expand. It is suggested to pay attention to the private refining and chemical fiber industry sectors 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) ; Satellite chemistry of light hydrocarbon cracking sector, Oriental Energy Co.Ltd(002221) ; Coal to olefin Ningxia Baofeng Energy Group Co.Ltd(600989) ; Three major chemical white horses Wanhua Chemical Group Co.Ltd(600309) , Shandong Hualu-Hengsheng Chemical Co.Ltd(600426) and Jiangsu Yangnong Chemical Co.Ltd(600486) .
(3) under the background of “carbon neutralization”, the installed capacity of wind power is expected to continue to rise. It is suggested to pay attention to relevant enterprises in the fields of wind power materials such as carbon fiber, polyether amine, matrix resin, interlayer materials, structural adhesive and so on. The photovoltaic industry chain company has strong driving force for growth and is expected to further expand its scale. It is suggested to pay attention to relevant enterprises in upstream silicon, EVA, PVDF, soda ash and other fields; The sales volume of new energy vehicles will still maintain a high growth rate, and the companies related to the lithium battery industry chain still have broad space. It is suggested to pay attention to the relevant enterprises in the field of lithium battery materials such as lithium battery electrolyte, lithium diaphragm, phosphorus chemical industry and fluorine chemical industry.
(4) the demand of chemical fertilizer industry will remain strong and promote the steady and orderly development of the industry. It is suggested to pay attention to the following suggestions: attention should be paid to the phosphate fertilizer sector, and the proposed attention to the proposed attention to the following: the following is a proposal to be paid to the sector of the following: the following of the following: the following of the following: the following of the proposal to be a proposal to pay attention to the sector of the following: the following is a proposal to pay attention to the sector of the following: the following is a proposal to pay attention to the sector of the phosphate fertilizer sector Hongda Xingye Co.Ltd(002002) 895\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\, nitrogen fertilizer sector Shandong Hualu-Hengsheng Chemical Co.Ltd(600426) , Luxi Chemical Group Co.Ltd(000830) .
(5) the R & D process of covid-19 vaccine and specific drugs continues to accelerate, and the upstream drug raw materials usher in development opportunities. It is suggested to pay attention to the Zhejiang Nhu Company Ltd(002001) .
Risk tips: crude oil price fluctuation risk, environmental protection risk, risk of inadequate implementation of relevant policies, risk of lower downstream demand and technology improvement.
