The safest place with the most definite demand is still optimistic about the chemical fertilizer sector. Affected by the repeated epidemic in China, the market deduces the signs of similar recession caused by China’s lower than expected economy and weak supply and demand. In this context, we need to find the place where the demand is most certain, and finally use the performance to prove the quality of the company – chemical fertilizer is still our most promising sector. The global food crisis has become a grey rhinoceros situation: Argentina’s main grain producing areas are expected to reduce wheat production by 25% in 22-23 years due to climate and cost problems, and the price of chemical fertilizer in Vietnam has risen to a 50 year high. Indonesia announced that it would ban the export of all edible oil and edible oil raw materials. The high boom of agrochemical industry is expected to continue until 2023, driving the continuation of the boom of chemical fertilizer. In combination with the three logics of current undervaluation + prosperity enhancement + industrial upgrading of Listed Companies in the chemical fertilizer sector, it is suggested to pay attention to the chemical fertilizer sector: Yunnan Yuntianhua Co.Ltd(600096) , Hubei Yihua Chemical Industry Co.Ltd(000422) , Hubei Xingfa Chemicals Group Co.Ltd(600141) , Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) , Qingdao East Steel Tower Stock Co.Ltd(002545) , Qinghai Salt Lake Industry Co.Ltd(000792) .
From the medium-term perspective, the four lines we recommend remain unchanged, including transaction stagflation (agrochemical) + stabilizing the economy + electricity price arbitrage + capacity transfer.
1) agrochemical 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) .
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.
3) 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 generating 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.
4) capacity transfer: Based on our 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 its industrial chain advantages. If China’s industrial chain, as an exporter of global price deflation, cannot be restored as soon as possible, the risk of global stagflation will be further exacerbated.
Risk warning: safety accidents affect the commencement; Rapid iteration of technical route; Changes in environmental protection policies.
