Core conclusion
Danger and opportunity under the dual weakness of supply and demand. Recently, we have seen that under the prevention and control of the epidemic, the supply chain is limited, some factories in China are shut down, exports are down, and sea freight is down. Crisis is an economic recession caused by short-term supply chain constraints and production stagnation. The reason for this is that the policy of supply and demand cannot be changed in the medium term, because the policy of supply and demand cannot be changed in the short term. The short-term recession has instead contributed to the risk of medium-term stagflation. From the medium-term perspective, the four lines we recommend remain unchanged, including transaction stagflation (agrochemical) + stabilizing the economy + electricity price arbitrage + capacity transfer. In combination with the current environment, it is recommended to focus on two directions: agrochemical and stabilizing the economy:
1) agricultural lines. Epidemic prevention and control will not reduce, but will boost the demand for food (just demand + hoarding) and stimulate upward inflation. Considering Ukraine’s recent claim that the area of spring ploughing has decreased by 50% and that spring ploughing in Northeast China has been affected by the epidemic prevention and control to a certain extent, we remain worried about the global food supply, and continue to recommend the strong cycle of chemical fertilizer. It is suggested to pay attention to Yunnan Yuntianhua Co.Ltd(600096) , Hubei Yihua Chemical Industry Co.Ltd(000422) , Hubei Xingfa Chemicals Group Co.Ltd(600141) ; It is suggested to pay attention to Qinghai Salt Lake Industry Co.Ltd(000792) , Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) , Qingdao East Steel Tower Stock Co.Ltd(002545) ; It is suggested to pay attention to Sichuan Meifeng Chemical Industry Co.Ltd(000731) , Hubei Yihua Chemical Industry Co.Ltd(000422) . The stagflation environment needs to constantly switch between inflation and recession. Inflation needs to buy upstream resources and recession needs to buy optional consumption. What can give consideration to both is chemical fertilizer, especially phosphate fertilizer and potassium fertilizer. Phosphate fertilizer and potassium fertilizer have strong resource attributes at the mining end, while the demand end is closely related to grain prices, both offensive and defensive.
2) stabilize the economy, adhere to the policy of clearing the epidemic situation and increase the pressure on China’s economic growth, because the demand for the elimination of epidemic prevention and control may be exchanged for subsequent stronger policy stimulus. The real estate chain deserves attention, and the chemical industry suggests to pay attention to: soda ash ( Inner Mongoliayuan Xing Energy Company Limited(000683) , Tangshan Sanyou Chemical Industries Co.Ltd(600409) , Hubei Shuanghuan), chlor alkali ( Hubei Yihua Chemical Industry Co.Ltd(000422) , Xinjiang Zhongtai Chenical Co.Ltd(002092) ), titanium dioxide ( Lb Group Co.Ltd(002601) ), and other industrial companies.
Electricity price arbitrage: oil and gas prices have risen sharply, and overseas electricity prices have continued to rise to 2-3 yuan / kWh. In contrast, the electricity price of enterprises in eastern China is 6-8 gross / kWh, while the self generation cost of low-cost coal in Western China is only 1-2 gross / kWh. We pay attention to the arbitrage opportunity of electricity price difference of high power consumption products per unit output value. According to our screening, the chemicals with high to low power consumption per unit output value are calcium carbide, yellow phosphorus, caustic soda, industrial silicon, synthetic ammonia, etc. It is suggested to pay attention to the enterprises with self owned coal, self owned power plants and high power consumption chemicals in the west, Guanghui Energy Co.Ltd(600256) , Hoshine Silicon Industry Co.Ltd(603260) , Hubei Yihua Chemical Industry Co.Ltd(000422) , Xinjiang Zhongtai Chenical Co.Ltd(002092) , Xinjiang Tianye Co.Ltd(600075) , etc.
Capacity transfer: Based on confidence in China’s epidemic prevention and control, we believe that China’s industrial chain will recover as soon as possible. Under this short-term assumption, we expect the European energy crisis to bring opportunities for China’s capacity transfer. If the production of European chemical plants is reduced or stopped due to energy and raw materials, China is expected to realize capacity transfer by virtue of the advantages of the industrial chain. If China, as the exporter of global price deflation, cannot recover its industrial chain as soon as possible, the risk of global stagflation will be further aggravated.
Risk warning: safety accidents affect the commencement; Rapid iteration of technical route; Changes in environmental protection policies.
