1. Supply and demand are improving, and the dawn of valuation repair is emerging
Since 2023, under the influence of multiple factors such as the global economic downturn and the continuous expansion of industrial capacity, the prosperity of the chemical industry has weakened. As of April 30, 2024, the China Chemical Product Price Index (CCPI) closed at 4702 points, down 2.35% from 4815 points at the beginning of 2023, and the historical percentage in the past five years was 47.14%. The historical quantile of P/E ratio of the chemical industry is 69.93%, and the historical quantile of P/B ratio is 30.06%.
After two years of decline in the chemical industry, the most pessimistic time has passed. From the supply side, the growth rate of capital expenditure in the chemical industry will slow down in 2024; From the demand side, the real estate policy continues to loosen, the purchase restriction and credit policy are gradually liberalized, coupled with the further expansion of the export of new energy vehicles, the further opening of the demand for chemicals to sea, and the supply and demand pattern has been gradually improved. With the gradual recovery of the economy, chemical industry is the strongest pro cyclical spear, with global competitive advantages, and the industry is expected to start an upward cycle.
2. It is recommended to pay attention to the cyclical target, the domestic substitute high-quality new material target and the high dividend target of the chemical supply and demand pattern
It is recommended to pay attention to the bottom of the supply and demand pattern that continues to improve: [Wanhua Chemical] [Satellite Chemical] [Xinhecheng] [Juhua Shares] [Xinfengming], etc
Domestic substitute high-quality new materials: [Kaisai Biology], [Huaheng Biology], [Guoci Materials], [Bailong Innovation Park], etc
High dividend target: [CNOOC], [Sinopec], [Meihua Biology], [Yuntianhua], etc
Review of chemical industry sector in 2023: overall pressure bearing, increasing differentiation of sectors
In 2023, the operating revenue of polyurethane segment will be 188.928 billion yuan, up 5.27% year on year; Net profit attributable to the parent company was 16.953 billion yuan, down 0.16% year on year; The net profit excluding non attributable to the parent company was 16.501 billion yuan, down 0.01% year on year. On the supply side, based on the challenges of environmental protection and energy conservation policies, it is expected that the production growth will slow down in the next five years; At the same time, the contraction of overseas supply side helps to drive the increase of domestic aggregate MDI exports. On the demand side, with the trade in policy, the steady development of downstream traditional industries and the vigorous development of new energy industries and other emerging industries, demand is expected to increase significantly.
In 2023, the operating revenue of phosphate fertilizer and phosphate chemical industry will be 133.788 billion yuan, down 10.62% year on year; The net profit attributable to the parent company was 8.14 billion yuan, down 56.29% year on year; The net profit excluding non attributable to the parent company was 7.924 billion yuan, down 56.62% year on year. The supply side of phosphorus chemical industry has increased production capacity due to environmental protection policies and other restrictions. At the same time, the grade of phosphate rock has declined year by year, and the price of phosphate rock in the value center is expected to remain high. At the same time, the country attaches great importance to food security, and the demand for phosphate fertilizer is still stable and improving.
In 2023, the operating income of the fluorine chemical industry sector will be 56.55 billion yuan, down 9.58% year on year; Net profit attributable to the parent company was 2.37 billion yuan, down 69.96% year on year; Net profit excluding non attributable to parent company was 1.878 billion yuan, down 74.76% year on year. In 2024, driven by upstream fluorite prices, global demand recovery, quota policy implementation and other factors, refrigerant supply will continue to fall short of demand, market concentration will increase, and prosperity is expected to improve. On the demand side, driven by the old for new policy, the demand for refrigerant is expected to increase. The demand for new and stock markets is strong, and the overall supply and demand pattern is good.
In 2023, the business income of coal chemical industry sector will be 123.805 billion yuan, down 3.94% year on year; Net profit attributable to the parent company was 7.953 billion yuan, down 36.75% year on year; Net profit excluding non attributable to the parent company was 7.814 billion yuan, down 37.21% year on year. In 2023, the industry will face the challenges of insufficient demand and excess supply, which will lead to a decline in prosperity. Under the policy support of the 2024 energy conservation and carbon reduction program and equipment update, it is expected that the industry structure will be improved, and the performance will gradually stabilize and recover.
In 2023, the operating income of pesticide sector will be 147.247 billion yuan, down 21.64% year on year; Net profit attributable to the parent company was 3.518 billion yuan, down 80.27% year on year; The net profit excluding non attributable to the parent company was 2.374 billion yuan, down 86.57% year on year. In 2023, the performance of the pesticide sector will be under pressure due to factors such as the fluctuation of agricultural product prices and the decline of crude drug prices.
In the long run, with the trend of destocking, it is expected that the price of agricultural chemicals will return to a reasonable range in 2024, and the enterprise performance is expected to recover.
The operating revenue of potash fertilizer sector in 2023 will be 34.706 billion yuan, a year-on-year decrease of 24.59%; The net profit attributable to the parent company was 13.202 billion yuan, down 45.16% year on year; The net profit excluding non attributable to the parent company was 14.203 billion yuan, a year-on-year decrease of 40.45%. The decline of potash fertilizer price in 2023 will lead to performance pressure; In 2024, the price of potash fertilizer is expected to stabilize and recover with the increase of sea freight, the limited global new capacity and other factors.
In 2023, the operating revenue of the organic silicon sector will be 44.712 billion yuan, down 3.20% year on year; Net profit attributable to the parent company was 3.908 billion yuan, down 53.04% year on year; Net profit excluding non attributable to the parent company was 3.322 billion yuan, down 58.94% year on year. In 2023, the silicone industry will face the challenges of weak market demand and unbalanced supply and demand. The product price will remain at a low level, and the industry performance will be affected to some extent. In 2024, the organosilicon plate is expected to be repaired with the recovery of production capacity clearing demand.
In 2023, the operating income of the food and feed additives sector will be 87.686 billion yuan, down 5.42% year on year; Net profit attributable to the parent company was 7.067 billion yuan, a year-on-year decrease of 40.18%; The net profit excluding non attributable to the parent company was 6.389 billion yuan, a year-on-year decrease of 40.22%. Due to the epidemic situation in 2022, there will be a large amount of overseas oversubscription of inventory. In 2023, the inventory will continue to be removed. The demand will be weak due to the low price of downstream pigs. In 2024, with the inventory level significantly improved, the supply and demand pattern will be better, and the product price is expected to continue to rise.
The business income of civil explosive products in 2023 will be 56.48 billion yuan, with a year-on-year growth of 24.73%; The net profit attributable to the parent company was 3.692 billion yuan, up 117.88% year on year; The net profit excluding non attributable to the parent company was 3.259 billion yuan, up 138.25% year on year. The coal supply guarantee policy and infrastructure projects in 2023 will promote the growth of market demand; Electronic detonators have replaced traditional products in an all-round way, and the overall operation of the industry is stable and good, with significant growth in performance and high visibility.
Risk warning
1. The risk of sharp fluctuations in the price of chemicals; 2. Risk of changes in industry and regulatory policies; 3. Force majeure and safety production risk; 4. The risk of intensified conflicts in some parts of the world; 5. Risk of trade disputes between countries and regions; 6. The risk of a sharp decline in the macro-economy.
