Wanhua Chemical (600309)
The company's share price was reviewed. The company has been listed for 23 years and has maintained rapid growth. Its revenue has increased from 345 million yuan in 2000 to 175.4 billion yuan in 2023, with CAGR of 31.12%. The net profit attributable to the parent company has increased from 50 million yuan in 2000 to 16.816 billion yuan, with CAGR of 28.81%. The stock price of the company has doubled twice in the past 10 years, and the two necessary conditions are the centralized release of new capacity and the rise of product prices. Judging from the changes of the company's core business polyurethane, the expanding petrochemical business, and the fine chemicals and new materials business invested heavily in R&D resources in the past 1-2 years, it is expected to enter a harvest period of continuous investment for many years. The company's industrial landscape is entering another harvest time of "orange red and orange green".
For petrochemical business, the fertile soil of the yard attracts live water. The company has operated two petrochemical projects, 750000 t/a PDH and 1 million t/a LPG cracking to ethylene. These two projects are the industrial basis of the company's integration strategy. This year, the larger and more advanced Penglai 900000 t PDH petrochemical integration project and the 1.2 million t/a ethylene project will be delivered and put into production successively, which will further expand the company's upstream industrial base. At the same time, naphtha+ethane feed is used for ethylene in Phase II, which is expected to improve its profitability. At present, the company has ordered 6 VLEC ethane transport ships. In the future, the company will focus more on the ethane raw material route, and will open up the supply route of ethane raw materials. Provide a strong guarantee for the stability and economy of the company's raw materials.
Polyurethane business: long-term advantages are further consolidated. The company's Fujian MDI has completed the expansion from 400000 tons/year to 800000 tons/year, and will soon complete the expansion of Ningbo MDI from 1.2 million tons/year to 1.8 million tons/year.
The company's capacity share in China will increase to 68% in, and its capacity share in the world will also exceed 35%.
The company's long-term advantages in MDI business will be further consolidated. Recently, BASF and Covestro's MDI devices in North America have broken down, disrupting market supply, and the demand for refrigerators in China has maintained a relatively rapid growth. The short-term profitability of the company's MDI is also optimistic. In terms of TDI, the company has completed the acquisition of Xinjiang Juli and expanded the production of Fujian Wanhua. The company's share of domestic production capacity has also exceeded 50%, and the industry pattern has been optimized.
New materials and fine chemicals: full of fruits, orange red and orange green. In recent years, the company has invested a lot of resources in R&D and product application development in the direction of new materials and fine chemicals, and some important projects have entered the harvest period. The 200000 t/a POE project and 48000 t/a citral project of the company will be put into production this year. Through years of continuous layout, the competitiveness of PC industry chain, TPU industry chain, PA12 industry chain and other products is increasingly emerging. A large number of independent research and development projects have entered the harvest period.
Investment suggestion: The company is a leader in the domestic chemical industry. Through continuous technological innovation and industrial chain layout in the fields of polyurethane, petrochemical, fine chemicals, new materials, etc., it has established a strong competitive advantage. In 2024, POE, ethylene phase II and Penglai phase I projects will be put into production. We expect the net profit attributable to the parent company from 2024 to 2026 to be RMB 18.798 billion, RMB 22.123 billion and RMB 26.122 billion, corresponding to PE of 15x, 13x and 11x respectively. We are optimistic about the company's development trend and maintain the "recommended" rating.
Risk tips: 1) the construction progress of new projects is not as expected, 2) the growth rate of downstream demand declines; 3) Some products are overcapacity.
