The quota of third-generation refrigerant has been implemented, and the inflection point of the industry has been found, maintaining the industry's "optimistic" rating
On November 6, 2023, the Ministry of Ecology and Environment issued the Plan for the Setting and Distribution of the Total Quota of Hydrofluorocarbons in 2024, and on January 11, 2024, the Publicity of the Production, Use and Import Quota of Substances that Deplete the Ozone Layer and Hydrofluorocarbons in 2024. At an important time when the refrigerant industry is about to start a new cycle, we released the second refrigerant industry report, hoping to provide some thoughts on several core issues that the market has been very concerned about. On the whole, we remain firmly optimistic about the long-term investment logic of HFCs refrigerant. At present, or the industry is gradually going out of the "second bottom" stage of our judgment, and the inflection point is obvious. As a rare chemical product with strictly controlled supply, refrigerant may have entered a long-term boom period of more than ten years in the future, maintaining the industry's "optimistic" rating.
The supply and demand are tight in the future or there is a gap, and the "second bottom" end valuation is reasonable. 1. Is the HFCs quota scheme conducive to the development of the industry? We believe that the quota scheme finally issued not only imposes strict supply constraints and ensures the continuity of policies, but also fully guarantees the development demand of the downstream in the future. It is one of the most favorable schemes for the development of the refrigerant industry in all the expectations of the market.
2. Is the quota supply of HFCs excessive and will there be a gap? We believe that the quota of the three HFCs (R32, R125, R134a) may match the current demand, but with the accumulation of demand and the digestion of inventory, there may be gaps. At that time, the balance can be achieved through internal adjustment within the scope of the policy, or some 65% HCFCs can be issued to meet the market demand, but no matter what kind of adjustment method, the specific implementation may lag behind.
3. What is the demand prospect of HFCs, and how will the decline of real estate affect it? We believe that the global demand for refrigerants will grow for a long time. Although HFCs are transitional varieties, the phase out cycle is expected to be very long. We expect that R32 demand has great growth potential, R134a demand is expected to be stable and growing, and R125 demand may be stable and declining. At the same time, according to our calculation, the direct impact of the real estate industry on the demand for refrigerant is relatively limited.
4. What is the impact of changes in overseas HFCs policies on China's exports? We expect that the quota reduction of HFCs in the United States and other developed countries in 2024 may have an impact on their total HFCs imports, but the impact on China's total HFCs exports is relatively controllable. In addition, we judge that the demand for R32 from the United States and other countries and regions may increase rather than decrease in the future.
5. Will other developing countries that have not frozen HFCs consumption threaten China's global position? After analyzing the industrial chain, layout planning, enterprise strength and other aspects of developing countries represented by India, we believe that it is difficult for them to shake the leading position of China's HFCs in the world.
6. Will the fourth generation refrigerant quickly and comprehensively replace HFCs refrigerant? We believe that the fourth generation refrigerants for household air conditioners are still being explored, and mature varieties are far away; Although the automobile refrigerant R1234yf has begun to be used, it is expected that it will take a long time to fully replace R134a.
7. Where is the refrigerant industry in the cycle now? How do you understand the valuation of related companies? We believe that although the current situation is not the absolute bottom of the HFCs industry's heavy losses, it can be considered as the "second bottom" range where the industry's inflection point has already occurred. Although compared with other basic chemical industries, the valuation of the refrigerant sector is on the high side, but it is in line with the industry development logic as a whole, and the future is still worth looking forward to. Beneficial objects: Juhua Shares, Sanmei Shares, Haohua Technology, Dongyue Group, Dongguang, Yonghe Shares, etc.
Risk warning: changes in industrial policies exceed expectations; Demand is less than expected; The progress of substitutes exceeded expectations.
