In the first quarter of 2022, the revenue and profit of chemical enterprises increased steadily, and the profitability repaired significantly month on month. The revenue and profit growth of sub industries in the upper reaches ranks first. With the gradual transmission of crude oil costs to downstream chemicals, the demand will recover after the spread of the epidemic is controlled. The current static valuation is low, maintaining the industry’s stronger than the market rating.
Key points supporting rating
In the first quarter of 2022, the price of crude oil rose significantly, the price of petrochemical products generally rose, and the revenue and profit growth of upstream sub industries ranked first. The total operating revenue of the whole industry was 2327784 billion yuan, a year-on-year increase of 34.01%; The total net profit attributable to the parent company was 138164 billion yuan, a year-on-year increase of 30.51%. In the whole year, the gross profit margin and net profit margin of the industry decreased by 1.87 PCTs and 0.28 PCTs respectively, to 20.06% and 6.59%. Roe (diluted) was 3.57%, with a year-on-year increase of 0.53pcts. On a month on month basis, in the first quarter of 2022, the operating revenue increased by 4.22%, the net profit attributable to the parent company increased by 77.45%, the sales gross profit margin decreased by 0.43pcts, and the sales net profit margin and ROE (diluted) increased by 2.66pcts and 1.48pcts respectively.
In terms of molecular industries, in the first quarter of 2022, among the 38 sub industries except viscose, only the chlor alkali sub industry experienced a year-on-year decline in revenue, and the revenue of other sub industries achieved positive growth year-on-year, of which the revenue of 7 sub industries increased by more than 50% year-on-year. In the first quarter, the geopolitical situation significantly affected the supply of chemical fertilizer, and the prices of main products in the chemical fertilizer sector increased significantly. The revenue of the sub industries of potassium fertilizer, compound fertilizer, phosphate fertilizer and nitrogen fertilizer increased by 163.90%, 43.53%, 36.22% and 22.02% respectively year-on-year. In terms of profit, it is mainly concentrated in the upstream sub industries. Among the 38 sub industries excluding viscose, the net profit attributable to the parent of 23 sub industries increased year-on-year in the first quarter of 2022, of which the net profit attributable to the parent of 12 sub industries increased by more than 100% year-on-year. The year-on-year increase in the net profit attributable to the parent company of potash fertilizer, civil explosive products and fluorine chemical industry was the highest, with 331.62%, 310.03% and 262.62% respectively.
In the first quarter of 2022, the construction in progress in the chemical industry was 818584 billion yuan, an increase of 21.35% year-on-year and 2.28% over the beginning of the period. Among the 38 sub industries, only the projects under construction of other chemical raw materials, civil explosive products, nitrogen fertilizer, soda ash and potassium fertilizer decreased year-on-year, and the projects under construction in other sub industries showed an upward trend. In the first quarter of 2022, the sub industries with a year-on-year increase of more than 100% include modified plastics, spandex, rubber additives, carbon black, nylon and silicone. The amount of fixed assets in the chemical industry in the first quarter of 2022 was 2292601 billion yuan, an increase of 9.06% over the same period in 2021 and 1.11% over the beginning of the period. The sub industries with the highest year-on-year increase in fixed assets include semiconductor materials, other chemicals, adhesives and tapes, electronic chemicals and non-metallic materials, with year-on-year increases of 43.42%, 39.97%, 37.14%, 34.61% and 30.91% respectively.
Investment advice
In 2022, the industry’s raw materials fluctuated at a high level, the downstream demand needs to be recovered, and the industry concentration increased. After a large adjustment in the early stage, the current P / E ratio (TTM excluding negative value) is in the historical (since 2002) quantile of 8.60%, and the P / B ratio (MRQ excluding negative value) is in the historical quantile of 34.50%. With the recovery of demand and steady growth after the epidemic, the overall trend of the industry has become optimistic. Maintain the rating that the industry is stronger than the market. The selection of sub industries focuses on the integration of leading companies and high scenery. It is recommended to pay attention to the following investment clues:
1. The raw materials fluctuate greatly and are optimistic about the leading companies in the integrated industry. Especially in the context of industrial upgrading and concentration improvement under the background of carbon neutrality, leading companies have strong anti risk ability and obvious advantages. Recommended Wanhua Chemical Group Co.Ltd(600309) , Shandong Hualu-Hengsheng Chemical Co.Ltd(600426) , Zhejiang Nhu Company Ltd(002001) . After the geopolitical factors are eliminated and the oil price has dropped, we are optimistic about the long-term development of China’s private petrochemical companies, and recommend Rongsheng Petro Chemical Co.Ltd(002493) , Jiangsu Eastern Shenghong Co.Ltd(000301) , satellite chemistry, etc.
2. High degree of refinement, and new materials are expected to continue the high boom. Since the fourth quarter of 2021, the stock price correction of some new material enterprises has been obvious, but the situation of short supply of semiconductors and new energy materials under the background of domestic substitution has not changed. With the gradual launch of new production capacity in 2022, it is expected that the production and sales of semiconductor and new energy materials enterprises will continue to be strong, and the valuation is expected to be repaired. Recommendations: Valiant Co.Ltd(002643) , Crystal Clear Electronic Material Co.Ltd(300655) , Jiangsu Yoke Technology Co.Ltd(002409) , Sunresin New Materials Co.Ltd Xi’An(300487) , Shandong Sinocera Functional Material Co.Ltd(300285) , Zhejiang Wansheng Co.Ltd(603010) , Anji Microelectronics Technology (Shanghai) Co.Ltd(688019) , National Silicon Industry Group Co.Ltd(688126) , etc.
3. The global agrochemical industry may continue to prosper. It is recommended that Shandong Hualu-Hengsheng Chemical Co.Ltd(600426) , Lier Chemical Co.Ltd(002258) , Lianhe Chemical Technology Co.Ltd(002250) ; Pay attention to Yunnan Yuntianhua Co.Ltd(600096) , Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) etc. In addition, under the “steady growth”, infrastructure is expected to continue to develop, and some building structural material enterprises will benefit. Recommendations: Sobute New Materials Co.Ltd(603916) , Zhejiang Huangma Technology Co.Ltd(603181) , Weihai Guangwei Composites Co.Ltd(300699) etc., pay attention to Lb Group Co.Ltd(002601) etc.
Main risks of rating
Risk of abnormal fluctuation of oil price; The duration and impact of the epidemic exceeded expectations.
