First, the second quarter profitability rebounded from the previous quarter
In the first half of 2019, the chemical sector achieved revenue of 3.6289 trillion yuan (YoY +10.4%), net profit (deduction of non-post, the same below) of 114.5 billion yuan (YoY -15.0%), industry net profit margin was 3.2%, down 0.9pct year-on-year. The main reason is that the downward pressure on the domestic economy is large, the overlapping trade frictions are repeated, and the demand for chemical products is declining. Since the second quarter, due to the supply side impact deepening the trend of superimposed oil prices, the industry's profitability has rebounded from the previous month. In the second quarter, the chemical sector realized revenue of 1,888.1 billion yuan (YoY +8.9%) and net profit of 65 billion yuan (YoY-15.2). %), the industry's net profit margin was 3.4%, down 1.0pct year-on-year, but rebounded 0.6pct from the first quarter. We expect the overall prosperity of the chemical industry to fluctuate downwards. The supply-side reconfiguration will further strengthen the advantages of the head enterprises, and the share of leading enterprises is expected to continue to increase, which in turn will lead the industry to become integrated and concentrated.
Second, the downstream sub-sector profit repair
The main sub-industry trends in the first half of 2019 include: 1. Due to weak demand for basic chemical raw materials, product prices are down, refining, organic raw materials, coal chemical (mainly nitrogen fertilizer), and chlor-alkali industry profitability decline year-on-year; Carbon black, fluorine chemical, silicone, polyurethane, nylon and other high-profit sub-industries, due to the high price drop, the performance declines a lot; 3, benefit from the PTA price rebound and private refining and chemical production gradually, the polyester sub-sector net profit year-on-year Growth; 4, due to supply contraction, product prices remain high, dyes, additives industry continues to better business; 5, rubber products, daily chemicals, adhesives, coatings and other early-stage profit squeezed by the sub-sector, Benefiting from the decline in raw material prices, the performance has rebounded significantly.
In the second quarter of 2019, the net profit of the polyester sub-sector increased greatly, and the dyes and pesticide companies were profitable. In the second quarter of 2019, the main sub-sectors' single-quarter changes include: 1. Sub-sectors such as refining, organic raw materials, and nitrogenous fertilizers (mainly coal chemical). As product prices fall further, earnings continue to decline; 2. Carbon black, fluorine chemical, In the early high-profit sub-sectors such as silicone, polyurethane and nylon, the market continued to decline in the second quarter due to the sharp drop in product prices. 3. The profit differentiation of sub-sectors such as pesticides and dyes, and the profits of enterprises affected by the suspension of production restrictions decreased significantly. Benefited from the general increase in product prices, the performance increased year-on-year; 4, with the increase in PTA earnings, and the refining and chemical projects gradually put into production, the net profit of the polyester sub-sector increased by 91%; 5, rubber products, daily chemicals, adhesives, coatings, etc. The downstream sub-sectors whose profits were squeezed, the cost pressures gradually eased, and the quarterly results continued to rise.
Third, the industry outlook: long-term concentration and integration
The steady growth policy is expected to be gradually reflected, but the trade friction repeatedly disturbs demand expectations, and the import substitution process of chemical products such as electronic chemicals and new materials continues. From the supply side point of view, as of the end of the second quarter of 2019, the construction of the chemical sector was 682.2 billion yuan, a year-on-year increase of 30.6%, but the growth rate has been reduced since the fourth quarter of 2018, and the increase is concentrated in polyester (large refining) Sub-sectors with high profitability in the early stage, such as organic chemicals and polyurethanes, and mainly leading enterprises to expand production, the overall industry pattern is still expected to remain relatively orderly. On April 27th, Jiangsu Province issued the “Jiangsu Chemical Industry Improvement and Improvement Plan”, which clearly defined the chemical industry in terms of time, quantity and type. The scale was strict, and the company was safe and environmentally friendly, industrial chain coordination, technical level, etc. The aspect is emphasized. Shandong Province also announced on April 22 that it plans to “close and eliminate a batch of” chemical production enterprises. Nearly 200 chemical companies in Tai'an, Laiyang, Weihai, Zhaoyuan, Zibo, Jinan and Yantai will be closed down. The supply side of the chemical industry faces restructuring. Among them, dyes, pesticides, rubber additives, additives and other sub-sectors are greatly affected. With the safety supervision and environmental protection efforts continue to be stricter, the formation of chemical stock capacity continues to be constrained in the medium term. In the long run, the industry development model is facing changes. The industry ecology of “small, scattered and chaotic” will be replaced by large-scale, centralized and integrated chemical parks. The standardized integrated leading enterprises are expected to continue to benefit.
In the medium and long term, combined with the supply and demand pattern, we expect the overall prosperity of the chemical industry to fluctuate downwards. The supply-side restructuring will further strengthen the advantages of the head enterprises, and the share of leading enterprises is expected to continue to increase, which in turn will lead the industry to become integrated and concentrated. It is expected that the overall price center of chemical products will rise steadily.
Fourth, the main line of investment: long-term optimistic about traditional industry leaders and new materials companies
1. Although external demand is expected to be repeated, but the demand for the industry chain is low, the peak season of the textile industry chain is expected to open. On the other hand, the polyester refining and chemical plant is gradually put into production in the near future, and the profit prospects tend to be clear, paying attention to Zhejiang Longsheng. (Dyes), Hengli Petrochemical, Tongkun, Hengyi Petrochemical, Rongsheng Petrochemical, etc.;
2. Low-value segmentation leader through stock business optimization and new category expansion, market share is expected to increase continuously in the long-term, industry demand side is expected to improve and supply-side reconfiguration is highly beneficial, it is recommended to pay attention to Wanhua Chemical (polyurethane, Petrochemical), Hualu Hengsheng (urea, coal chemical), Jinhe Industrial (sweetener, etc.);
3. The stock price of chemical new materials company follows the fluctuation of market risk preference in the short term, but the import substitution logic has high certainty. For a long time, it is optimistic about Guozhuang Materials, Guangwei Composite Materials, Feikai Materials, Powerful New Materials, Li Anlong and other companies.
risk warning. Downstream demand is less than expected; crude oil prices fluctuate sharply; trade frictions exacerbate risks.
Link: Individual stock analysis
Zhejiang Longsheng (600352)
Dyes are expected to return to growth
Zhejiang Longsheng's dye business achieved sales of 101,300 tons in the first half of the year, down 12.37% year-on-year, and realized revenue of 5.355 billion yuan, up 4.60% year-on-year. The gross profit margin was 46.96%, down 1.98 percentage points year-on-year. The decline in sales volume in the first half of the year was mainly affected by the relocation of the Daochang factory. The dye price was affected by factors such as tight supply and safety accidents, which increased by 19.38% year-on-year to RMB 52,900, which led to the growth of dye revenue. Affected by recent safety accidents in the chemical industry, it is expected that the environmental protection and safety production supervision in the dye field will be tightened for a long time. With the arrival of the peak season of textile and apparel demand in the second half of the year, it is expected to promote the company's dye price and production and sales, and promote the dye business. increase. (Central Plains Securities)
Guangwei Composite Materials (300699)
Investment in large tow industrialization project
In the first half of the year, the operating income was 836 million yuan, a year-on-year increase of 28.51%; the net profit attributable to the mother was 310 million yuan, a year-on-year increase of 44.37%. Carbon beam products consume 4,600 tons of carbon fiber in 2018. It is expected to consume 25,000 tons of carbon fiber in 2020. The supply of large tow carbon fiber has become a major factor constraining the growth of the company's carbon beam business. The company plans to invest 2 billion yuan to set up an industrialization project in Baotou to form a production capacity of 10,000 tons/year of 24K, 36K and 48K large tow carbon fiber, and finally achieve the capacity of 10,000 tons/year of carbon fiber. The first phase of the project has a capacity of 2,000 tons per year. After completion, it can contribute 391.98 million yuan in operating income and 92.11 million yuan in after-tax profits. After the completion of the project, it will effectively alleviate the demand for carbon fiber products for large tow bundle carbon fiber and ensure the expansion of carbon beam products in the downstream market.
