Event: 24H1 performance declined slightly, Q2 profit declined month-on-month. Wanhua Chemical's total revenue for the first half of 2024 was 97.067 billion yuan, +10.77% YoY, net profit to mother 8.174 billion yuan, -4.60% YoY, net profit 8.099 billion yuan, -2.54% YoY; second-quarter revenue 50.906 billion yuan, +11.42% YoY, net profit to mother 4.017 billion yuan, -3.38% YoY.
Growth in polyurethane demand drives performance, and fine chemicals show potential for growth. In the first half of 2024, the company's three major business segments operated steadily. The polyurethane business performed well due to increased global demand, particularly driven by the cold, automobile industry, and favorable overseas markets. The petrochemical business remained stable, and the fine chemicals and new materials business showed strong growth potential by leveraging the country's support for emerging industries. In the second quarter of 2024, the company's polyurethane division had revenue of 35.455 billion yuan and sales volume of 2.69 million tons. According to Baichuan Yingfu, the average price of pure MDI this season was about 1,8817 yuan/ton, and the average price of polymeric MDI was 17,141 yuan/ton, all showing a month-on-month upward trend. The production capacity of the MDI project in Fujian Industrial Park was expanded to 0.8 million tons/year, greatly increasing the scale of production, but the force majeure impact of overseas installations weakened some of the additional production capacity benefits, causing capacity utilization challenges.
The petrochemical sector achieved revenue of 39.574 billion yuan and sales reached 2.75 million tons. The fine chemicals and new materials segment generated revenue of 12978 billion yuan in the second quarter, with sales volume of 0.92 million tons.
Wanhua Chemical focuses on new materials to break down technical barriers to POE localization. Since 2019, Wanhua Chemical has clarified the strategic development direction in the field of fine chemicals and new materials, focusing on the expansion of the new materials market. The company's 0.2 million-ton PoE phase I project in Penglai is a key milestone in this strategy. It marks a major breakthrough in the company's polyolefin elastomer technology, successfully achieved localization replacement, and broken international technical barriers. The project was put into operation as scheduled in the first half of 2024, making it the first such project in China, significantly reducing China's external dependence on such products. Given the technical difficulty of POE products due to complex polymerization technology and strict process control, Wanhua Chemical's achievement highlights its technical research and development capabilities. Currently, China is highly dependent on imports of POE. Wanhua Chemical's ethylene project provides key raw materials for POE production, ensures a stable supply of octylhexene through an integrated industrial chain layout, and enhances the advantages of vertical integration.
At the same time, Wanhua Chemical is also active in ADI business, bisphenol A projects, and emerging fields such as citral, flavors and fragrances to enrich the product portfolio and enhance market competitiveness. With the booming development of the new materials industry, the fine chemicals sector will become a new driving force for Wanhua Chemical's performance growth. Through diversified revenue sources and technological innovation, it will further consolidate its leading position in the global chemical market and achieve sustainable development.
Maintain a “Highly Recommended” investment rating. Considering the decline in US real estate growth data, which may have a negative impact on the company, we expect the company to achieve revenue of 192.9 billion, 214.1 billion, and 231.2 billion yuan in 2024-2026, achieve net profit of 17.2 billion, 20.9 billion, and 23 billion yuan, EPS of 5.48 yuan, 6.66 yuan and 7.33 yuan, respectively, and PE of 13.7 times, 11.3 times, and 10.2 times, respectively, maintaining “highly recommended” Investment ratings.
Risk warning: Product prices fluctuate greatly, raw material prices fluctuate greatly, and the commissioning of new production capacity falls short of expectations