Industry perspective
In 2021, the chemical industry maintained a high prosperity, and the overall performance increased significantly under the background of low base in 2020; In the first quarter of 2022, affected by the high commodity prices and repeated epidemics, the profitability of the industry fell slightly. In 2021, Shenwan chemical industry achieved an overall operating revenue of 5.79 trillion yuan, a year-on-year increase of 35.6%; The net profit attributable to the parent company was 356.5 billion yuan, a year-on-year increase of 128.7%; The overall gross profit margin of the industry was 20.4%, with a year-on-year increase of 1.2%; The net interest rate was 6.8%, a year-on-year increase of 2.7%. In the first quarter of 2022, Shenwan chemical industry achieved an overall operating revenue of 1.63 trillion yuan, a year-on-year increase of 33.8%; The net profit attributable to the parent company was 105.7 billion yuan, a year-on-year increase of 31.2%; The overall gross profit margin of the industry was 20.2%, down 1.5% year-on-year; The net interest rate was 7.2%, a year-on-year decrease of 0.2%.
In the context of high inflation and repeated outbreaks, the market is more concerned about the certainty of the demand side. From the performance and share price performance of sub industries and individual stocks in 2021 and the first quarter of 2022, the profitability of sub industries and related enterprises such as chemical fertilizer, chlor alkali, soda ash and pesticide is strong and the market attention is high. The main reason is that under the background of both supply and demand, the product price has increased significantly, and the profit margin continues to rise. Among them, the demand side of the chemical fertilizer sector is relatively rigid. On the supply side, under the background of the Russian Ukrainian war, Russia, as an important fertilizer producer in the world, decided to stop the export of chemical fertilizer. Its output of nitrogen fertilizer, potassium fertilizer, phosphorus fertilizer and urea accounted for 23%, 18%, 15% and 14% respectively. It is the world’s largest exporter of nitrogen fertilizer and the second largest exporter of potassium fertilizer, The fourth largest phosphate fertilizer exporter, under the expectation of policy implementation, the global fertilizer supply may tighten in the future; Considering the need for achieving the annual economic growth target and stable growth, the soda ash sector has frequent support policies in real estate, and the support on the demand side is relatively strong.
The cost of raw materials and energy of leading enterprises generally rose, and the anti inflation sectors such as chemical fertilizers and pesticides performed well Shandong Hualu-Hengsheng Chemical Co.Ltd(600426) in 2021 and 2022q1, the net profit attributable to the parent company increased by 303% and 54%, and Jiangsu Yangnong Chemical Co.Ltd(600486) was 1% and 104%. The gross profit margin of Hualu and Yangnong in the first quarter increased by 12.5% and 7.4% respectively. For polyurethane leader Wanhua Chemical Group Co.Ltd(600309) and titanium dioxide leader Lb Group Co.Ltd(002601) , under the supply-demand mismatch market last year, the growth rate of net profit attributable to the parent company reached 145% and 104% respectively. After the third quarter of last year, the continuous rise in the prices of energy and some raw materials has brought certain cost pressure to the leading companies. In the first quarter of this year, the growth rates of net profit of Wanhua and Longbai were – 19% and 0.03% respectively Shandong Linglong Tyre Co.Ltd(601966) since last year, it has undertaken multiple pressures such as declining demand, rising prices of raw materials and soaring sea freight. In 2021 and 2022q1, the net profit attributable to the parent decreased by 64% and 119% respectively, and the gross profit margin decreased by 10.7% and 11.5% respectively year-on-year. The performance of new material leader Shandong Sinocera Functional Material Co.Ltd(300285) increased steadily, and the sales of catalytic materials and electronic materials were good. The net profit attributable to parent company in 2021 and 2022q1 increased by 39% and 12% respectively, and the future growth will be better.
Investment advice
Since this year, the market has been under pressure due to the disturbance of various factors. A large part of the bad has been reflected in the stock price, and the subsequent upward momentum may be gradually greater than the downward momentum. In terms of investment direction, we think there are four main lines to focus on. First, the inflation main line. Although its cost performance will fluctuate at different stages of the market, it may be one of the main lines throughout the year under the background of high inflation. It is suggested to focus on the related targets of phosphate fertilizer, potassium fertilizer and pesticide; Second, the combination of steady growth. The pressure of the epidemic has further increased the market’s attention to the direction of steady growth. Relevant lines are suggested to focus on soda ash with good supply and demand; The third is the defensive combination. Under the background that the market is still chaotic in the medium term, it is suggested to pay attention to the targets with undervalued value and good outlook, such as Wanhua Chemical Group Co.Ltd(600309) , Shandong Hualu-Hengsheng Chemical Co.Ltd(600426) , Jiangsu Yangnong Chemical Co.Ltd(600486) ; Fourth, growth stocks may have midline layout opportunities brought by oversold.
Risk tips
The epidemic affected the decline in demand outside China, the sharp fluctuation of crude oil prices, and trade policies affected the industrial layout.
