The Zhitong Finance App learned that Guosheng Securities released a research report indicating that China's second-generation refrigerants experienced a boom in 2009-2011 and 2017-2018, and the core product R22 achieved increases of 300% and 144% respectively. Referring to the European context where four generations are protected by patents and are expensive and have yet to be released, European third-generation refrigerants increased 6-9 times after the quota was cut in 2017-2018. In the current boom, in a context where the three generations have begun to implement quotas, the fourth generation of patents have not yet fully expired, and the third generation accounts for a very low share of downstream costs (about 1%-2%), third-generation refrigerants are expected to show a super boom that surpasses the historical two-round and two-stage performance.

Guosheng Securities's main views are as follows:

Safety, environmental protection, and low cost are the “impossible triangles” of refrigerants

Mainstream domestic second-generation and third-generation refrigerants are low in price and are relatively safe, but they are very harmful to the environment, and they will all be phased out under the Montreal Agreement. In terms of alternatives, fluorine-free refrigerants are inexpensive, but they are either flammable or explosive, or highly toxic, or greatly increase the cost of air conditioning compressors. Fourth-generation refrigerants containing fluorine have excellent environmental protection, are relatively safe, but are expensive. Therefore, Guosheng Securities believes that environmental protection, safety, and cost are the “impossible triangles” of refrigerants at this stage. In Europe, where quotas were implemented before China, the share of refrigerants for fourth-generation cars was as high as 50%. Referring to European experience, if fluorine-free refrigerants such as R290 do not become mainstream, fourth-generation fluorine-containing refrigerants are expected to continue to penetrate our country.

Protected by patents, four generations have limited supply, high prices, and huge space for third-generation refrigerants

According to Guosheng Securities, the fourth-generation refrigerant was jointly developed by global fluorine chemical leaders Honeywell and Chemours. As of 2016, there were more than 426 R1234yf related patents (including intermediate patents and application patents), so the price is high. Currently, the mainstream fourth-generation refrigerant R1234yf sells for more than 400,000 yuan/ton, while the charging capacity and refrigeration efficiency are close to that of the third generation. Therefore, until the amount of fourth-generation refrigerants is released and the price is drastically reduced, there is room for the price of third-generation refrigerants to greatly exceed expectations. After the patent fully expires, due to the high material bill consumption of mainstream process routes, the four-generation price is expected to be several times higher than the current price of the third generation for a long time (estimated cash cost of about 70,000 yuan/ton by Guosheng Securities).

If four generations of fluorinated refrigerants continue to penetrate, the third generation is expected to achieve a long-term upward shift in the pricing center

Supply has shrunk drastically, the pattern is concentrated, and the third-generation refrigerant boom has accelerated. Looking at supply, the effective production capacity of the three mainstream varieties in this boom has essentially been cut by more than 40% after implementing the quota in 2024; looking at the competitive pattern, the third-generation refrigerant quota is more concentrated than the second generation, with leading giant's share as high as 37%, far higher than the second-generation leader Dongyue's share of 26%; depending on demand, about 70% of refrigerant terminal demand comes from overseas. In terms of direct exports, the export ratio of third-generation refrigerants is about 50%. They are mainly located in Southeast Asia, India, the Middle East and other regions, and are less affected by third-generation quota cuts in developed countries such as Europe and the United States. In terms of indirect exports, 62% of China's air conditioning exports are located in countries along the Belt and Road, benefiting from the increase in the air conditioning penetration rate and continuous growth.

Investment advice: At the current price, the market value quotas per unit of Juhua (600160.SH), Sanmei (603379.SH), Dongyue Group (00189), and Yonghe (605020.SH), which are the core targets, are 404/443/567/584 tons, respectively. The target profit continues to increase as the refrigerant industry sentiment rises, and space can be expected.

Risk warning: Demand for air conditioning falls short of expectations, fluctuating product prices, changes in quota policies, and estimated risks.