Wanhua Chemical is currently in the bottom profit range.
We believe that Wanhua Chemical has technical and cost advantages in the field of MDI, has its own α attribute, and the new material plate has entered a rapid production period. As a leading chemical enterprise, its valuation is expected to increase steadily. In addition, the main business MDI, TDI and petrochemical products were affected by repeated epidemic and off-season demand in the first half of the year, and the current price spreads are all in the historical low percentile. Looking to the future, in the short term, under the background of high overseas energy costs, there is limited room for price decline. with the marginal improvement of domestic demand and the coming winter in Europe and the United States, energy costs and the possibility of force majeure will increase, and prices will rebound. In the long run, we believe that it is the bottom range of the industry boom and the bottom range of corporate profits, and we are optimistic about the sustainable profitability of the company in the context of global chemical plants, relying on its own advantages of raw material integration.
Oligopoly in MDI industry, price spread is historically low
At present, due to the impact of the epidemic and the off-season in China, and the expectation of economic downturn overseas, there is a short-term sluggish demand for MDI. The cost side is affected by the increase in the price of crude oil, and raw material and energy costs have increased significantly. The aggregate MDI spread is in the historical 15.22% percentile, and the pure MDI spread is in the historical 19.93% percentile. We believe that MDI has the attribute of oligopoly, and unlike other commodities, there is little probability of low-price competition, while the global supply is stable. In the next two years, only companies in the world have definite production expansion plans that can adjust the pace of production, and MDI continues to fall in limited space.
TDI force majeure occurs frequently, supply is tight, and export volume continues to increase. At present, the competition pattern of TDI is stable, has gone through the stage of oversupply, and the supply and demand is relatively tight.
Although the third quarter is the off-season of demand, the recent frequent occurrence of force majeure factors at home and abroad has led to a shortage of TDI supply, prices have stopped falling and rebounded, and the follow-up demand margin has improved, and TDI prices are expected to continue to rise. In the long run, the growth rate of TDI exports is obvious. In 2020, the proportion of TDI exports reached 25.2%, in 2021, TDI exports accounted for 31.3%, and in the first half of 2022, TDI exports accounted for 32.5% of TDI exports.
We believe that there is no new capacity for overseas TDI, and the TDI industry is in the stage of domestic manufacturers grabbing overseas market share through exports, and TDI exports are expected to maintain high growth in the future.
The short-term profit of Petrochemical is weak, and the price gap is expected to be repaired in the future.
The petrochemical sector is affected by the upsurge of crude oil, and the cost end is under pressure. The price spreads of C2, C3 and C4 are all in the historical low quantile range, in which the PVC spread is in the historical low quantile, the styrene spread is in the historical quartile, the ethylene oxide spread is in the historical quantile, the acrylic price spread is in the historical quantile, and the methyl acrylate spread is in the historical quantile 56.79%. The butyl acrylate price spread is at the historical 39.30% quartile, and the butadiene price spread is at the historical 36.72% quartile. At present, the price of crude oil fluctuates around 90 US dollars per barrel, the pressure on the cost side relative to Q2 has decreased, and the follow-up petrochemical products are expected to usher in the repair of price differences.
New materials enter a period of rapid development
Relying on its own strong R & D strength and the advantage of industrial chain integration, the company has comprehensively entered the fields of new energy, nutrition, high-end domestic substitution, etc., in semiconductor materials such as polishing liquid and polishing pads, ternary materials and battery materials such as lithium iron phosphate, biodegradable materials such as PBAT and PLA, high-end polyolefin materials such as POE, citral derivatives and other materials have planning and layout, according to the company's new material production progress. Nylon 12 has been put into production recently, HDI, citral and its derivatives, maleic anhydride, new PC, lithium iron phosphate are expected to be put into production in 2023, POE, PLA, NMP, new PMMA, polyetheramine are expected to be put into production in 2024. Standing at the current time node, the new material plate has entered a period of rapid development. According to our forecast, after the major projects of the 2022-2024 new materials plate are completed and put into production, the new annual revenue contribution will reach 52.145 billion, and the new materials revenue will maintain a growth rate of more than 60% in the next three years.
Investment suggestion
At present, the polyurethane and petrochemical sectors are in the bottom range of the price spread. we are optimistic about the rapid growth brought about by the future profit repair of the MDI and petrochemical sectors and the commissioning of new materials. The company's net profit from 2022 to 2024 is expected to be 213.54 yuan, 260.85 yuan and 34.398 billion yuan respectively, with year-on-year growth rates of-13.4%, 22.2% and 31.9%, respectively. The current share price corresponds to 14 times, 11 times and 8 times the PE respectively. Maintain a "buy" rating.
Risk hint
(1) the progress of project production is not as expected.
(2) the product price fluctuates greatly.
(3) the risk of force majeure of the device
(4) the progress of asset acquisition is not as expected.
