China Galaxy Securities: The chemical industry is lingering at a low level of prosperity, waiting for the cycle to build a bottom and rise.

China Galaxy Securities stated that in Q1 2025, the chemical industry sector showed differentiated performance internally. The petrochemical and basic chemical sectors achieved revenue of 1015.1 and 607 billion yuan respectively, with year-on-year changes of -7.1% and 6.4%. They achieved net income of 17 and 37.1 billion yuan respectively, with year-on-year changes of -23.5% and 4.7%. Among them, the drop in oil prices is expected to be the main reason dragging down the performance of the petrochemical sector. The performance growth of the basic chemical sector may be related to industry scale expansion and supply disruptions leading to price surges in certain products. In Q1 2025, the sales gross margin of the petrochemical and basic chemical sectors was 14.3% and 17.9% respectively, at historical bottom levels. It is believed that the low prosperity of the chemical industry is expected to accelerate the elimination of backward production capacity and enhance industry self-discipline momentum. At the same time, with the continuous strengthening of domestic policies to stimulate domestic demand, the end demand momentum is expected to gradually stabilize, waiting for the industry prosperity cycle to build a bottom and rise.