Description of the event
On the evening of August 12, 2024, Wanhua Chemical released its report for the first half of 2024. The company's 2024H1 revenue was 97.067 billion yuan, up 10.77% year on year, net profit to mother was 8.174 billion yuan, down 4.60% year on year, 2024Q2 revenue was 50.906 billion yuan, up 11.42% year on year, 10.28% month on month, and net profit to mother was 4.017 billion yuan, down 11.03% year on year, down 3.37% month on month. Achieved The gross profit margin on sales was 15.31%.
Sales of main products increased and revenue improved month-on-month, and the price difference in the polyurethane sector declined somewhat. 2024Q2 polyurethane/petrochemical/new materials segment sales volume was 1.38/1.41/0.48 million tons, respectively, with a month-on-month change of +5.34/+5.22/ +9.09% month-on-month; in terms of product and raw material prices, 2024Q2 polymerized MDI/pure MDI/TDI/soft foam polyether/pure benzene/thermal coal (Q5000) and propane (CP) were 17119/18823/14813/9095/65/8975/ Yuan/ton and $590 per ton were +6.02/-7.08/-11.24/0.04/+9.85/-5.95/ -5.82%, respectively. 2024Q2 polyurethane/petrochemical/new materials revenue was 17.954/21.061/6.874 billion yuan, respectively, with a month-on-month change of +2.58/+13.76/ +12.59%, respectively. Judging from operating data, the 2024Q2 petrochemical and new materials sectors are growing steadily. We speculate that the short-term decline in pure MDI and TDI prices in the polyurethane sector and the rise in raw material prices such as pure benzene put pressure on short-term profits, causing the company's 2024Q2 profit to fall slightly month-on-month.
The trade-in policy is compounded by expectations of US interest rate cuts. MDI demand is expected to improve in the future. Currently, downstream MDI demand is gradually entering the Spring Festival peak season, and prices are supported. In the long run, the State Council officially issued the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-In”, which clarifies the trade-in of household appliances, promotes the exchange of consumer goods in home furnishings, and helps the consumer demand for household appliances such as refrigerators and freezers. On the overseas side, starting in 2022, the overseas economy entered a stage of slow growth. Demand was relatively weak, and the export price of polymeric MDI was under pressure, but MDI exports remained high. In 2023, polymer MDI exports reached 1.0437 million tons, and pure MDI exports were 0.121 million tons. After 2022, the US real estate boom is weak. In the future, as US interest rates cut and mortgage interest rates gradually fall, US real estate is expected to rebound. We expect overseas demand represented by the US to gradually recover.
Production capacity for polyurethane+ new materials is gradually being implemented, and future performance growth is expected. The company is progressing the construction and commissioning of new installations in Ningbo, Fujian MDI, and Fujian TDI in an orderly manner. The MDI and TDI supply pattern is expected to continue to improve in the future. In the polyurethane field, production capacity+cost have obvious advantages. Domestic consumer goods replacement and future US interest rate cut expectations, and the promotion of new applications such as formaldehyde-free panels, cold chain cold storage, and energy-saving tray doors and windows is expected to grow steadily in the future. Ethylene Phase II and Penglai Phase I are also expected to be gradually put into operation by the end of 2024. Ethylene Phase II+ future Ethylene Phase I raw material transformation is expected to be re-evaluated by the petrochemical sector in the future. At present, the 0.2 million-ton PoE project has been put into operation, and the 0.048 million-ton citral and derivatives project is expected to be put into operation in the third quarter of 2024. At that time, the citral, vitamin, fragrance and fragrance industry chains will be opened up one after another. The company has a trinity layout, multiple projects have been launched one after another, and future performance will continue to develop.
Investment advice
Wanhua Chemical is a well-known enterprise in the global polyurethane industry. New material projects such as new energy, fragrance, POE, and semiconductors are progressing at an accelerated pace. It is expected that capital investment will continue to be high in the future, and the performance center is expected to gradually move upward. The company's net profit for 2024-2026 is estimated to be 20.275, 25.341, and 27.754 billion yuan, respectively, with year-on-year growth rates of 20.6%, 25.0%, and 9.5%, respectively. The current stock price corresponding to PE is 12, 9, and 8 times, respectively, maintaining a “buy” rating.
Risk warning
(1) The risk that project construction progress falls short of expectations;
(2) The risk that project approval progress falls short of expectations;
(3) The risk of large fluctuations in raw material prices;
(4) The risk of a sharp drop in product prices.