24H1 net profit of 8.2 billion yuan/year over year -4.6%, maintaining the “buy” rating
Wanhua Chemical released its 24th mid-year report on August 12, achieving revenue of 97.1 billion yuan, +10.8% year on year, net profit of 8.2 billion yuan (not 8.1 billion yuan), or -4.6% YoY (-2.5% YoY after deduction); of which 24Q2 net profit to mother was 4 billion yuan (after deducting 4 billion yuan), -11% /month-on-month (minus -8% YoY /-4% month-on-month). The company pays mid-year dividends, and plans to distribute a cash dividend of 5.20 yuan for every 10 shares. We expect the company's net profit to be 17.5/20.6/23.3 billion yuan for 24-26, corresponding EPS of 5.58/6.56/7.43 yuan. Combined with a comparable 24-year Wind average of 15xPE, considering the company's leading position in the polyurethane industry and the growth potential of new projects, we will give the company 19xPE in 24, with a target price of 106.02 yuan, maintaining a “buy” rating.
The release of new production capacity helped the growth of polyurethane production and sales, and export demand supported the MDI boom in the first half of the year
24H1 polyurethane sales yoy +14% to 2.69 million tons, mainly due to new production capacity such as MDI and TDI in Fujian, revenue yoy +8% to 35.5 billion yuan. The price of pure benzene raw materials continued to be high, and the gross margin yoy-1.1 pct reached 28%. According to Baichuan Yingfu, the average price of H1 polymer MDI/ pure MDI/TDI/ polyether was 1.66/0.0195/0.0157/0.0091 million yuan/ton, +8%/+4%/-15%/-7%, and the MDI/TDI/polyether price difference was 0.0109/0.0099/0.00177 million/ton, compared to +145/-2653/-223 yuan/ton. MDI exports in the first half of the year supported the product boom, while domestic terminal demand was weak, and the TDI/polyether boom was under pressure.
Production and sales of petrochemical and new material products continue to grow. The gross margin is still to be repaired under the weak economy. The H1 petrochemical sector has sales volume of 2.75 million tons, revenue of 39.6 billion yuan, yoy +10%, gross profit margin of 4.5%, yoy+2.2pct, Q2 sales volume of 1.41 million tons, qoq +5%, revenue 21.1 billion yuan, yoy +17% /qoq +14%. New material H1 sold 0.92 million tons, yoy +24%, revenue 13 billion yuan, yoy +15%, gross profit margin 17%, yoy-5.1pct, of which Q2 sold 0.48 million tons, yoy +23% /qoq +9%, revenue 6.9 billion yuan, yoy +16% /qoq +13%. H1 comprehensive gross profit margin 16.4% (yoy-0.01pct, of which Q2 gross profit margin is 15.3%, yoy-0.1/qoq-2.2pct); H1 period expense ratio YOY+0.7pct to 5.5%.
The increase in new projects is expected to be gradually realized. After entering a new growth cycle, the company's projects will be put into centralized operation. The planned/ongoing projects include many products in the three major sectors: polyurethane (Ningbo +0.6 million tons of MDI; Fujian +0.33 million tons of TDI, etc.), petrochemicals (Penglai base, ethylene phase II, etc.), and new materials (POE/citral, etc.). As of 24H1's construction balance of 59.8 billion yuan, it is expected that the successive implementation of new projects and the release of new materials with high added value will continue to contribute to the increase in the future.
Risk warning: downstream demand falls short of expectations; progress of new projects falls short of expectations; raw material prices fluctuate.