occurrences
Wanhua Chemical released its semi-annual report: 2024H1 achieved operating income of 97.067 billion yuan, a year-on-year increase of 10.77%, and realized net profit to mother of 8.174 billion yuan, a year-on-year decrease of 4.6%. 2024Q2's quarterly revenue was 50.906 billion yuan, up 11.42% year on year and 10.28% month on month. Q2 achieved net profit to mother of 4.017 billion yuan in a single quarter, -11.03% year-on-year and -3.38% month-on-month.
Key points of investment
Supported by a combination of supply and demand, the cost of polyurethane products is falling and volume and price are rising sharply, which is expected to drive the company's performance growth
2024H1, the steady domestic growth policy continues to gain strength. The downstream consumer goods market has maintained a growth trend. Demand for polyurethane products is good. Combined with supply-side manufacturer control, prices of MDI and other products have fluctuated upward, supporting the steady growth in the company's polyurethane product production, sales, and revenue. 2024H1's polyurethane product production reached 2.83 million tons, up 15.0% year on year, and sales volume reached 2.69 million tons, up 14.5% year on year, contributing 35.455 billion yuan in revenue, up 8.2% year on year. The average price of polymeric MDI in August was 17,250 yuan per ton, up 10.7% from the beginning of the year. Multiple vendors around the world shut down for maintenance as planned, and overall supply was reduced. Polymeric MDI prices are expected to continue to rise, driving the company's polyurethane product prices to rise further. The cost pressure caused by the increase in upstream pure benzene prices during the year has recently eased. Currently, the price of pure benzene has dropped rapidly. The average price in August was 8,474 yuan per ton, down 9.65% from the June high. The overall trend is still difficult to recover from a sharp rebound. It is expected that the company's polyurethane sector performance will continue to grow during the year, driving the company's long-term performance.
The profitability of the petrochemical sector improved, and the increase in fine chemicals sales was affected by high international crude oil prices and limited downstream demand in the first half of the year. Although the company's petrochemical sector recovered slightly, the overall profit level was still relatively low. 2024H1's production of petrochemical products reached 2.77 million tons, up 23.1% year on year. Sales volume declined year on year, but sales revenue increased 9.5% year on year, and profitability initially improved. The company is actively developing business in emerging markets, and the sales volume and market share of new products such as ADI and PC have increased significantly. 2024H1's production of fine chemicals and new materials series products reached 1 million tons, up 26.6% year on year, sales volume reached 0.92 million tons, up 24.3% year on year, and sales revenue reached 12.979 billion yuan, up 15.2% year on year.
Production expansion and innovation go hand in hand to open up new space for growth
The company continues to promote the expansion of production capacity in the polyurethane sector. In the first half of 2024, the company completed technical improvement and production expansion of the MDI project, and the MDI production capacity in Fujian increased from 0.4 million tons/year to 0.8 million tons/year. Meanwhile, projects with an annual output of 0.18 million tons of hexanediamine and an annual output of 0.2 million tons of PoE have been successfully put into operation. In the second half of the year, the company will continue to improve the level of production safety management through digital and intelligent means to ensure stable production of devices. In the petrochemical sector, the company continues to promote the construction of the second phase of ethylene and the first phase of Penglai, aiming to start production as scheduled. In the new materials sector, the company will focus on building the operation of citral and nutritional products devices, and emerging businesses such as flavors and fragrances are also being industrialized. Consolidate the company's profitability by expanding the market share of original products and industrializing new products, enrich the company's product line, and open up new space for growth.
Profit forecasting
The company's 2024-2026 EPS is predicted to be 6.20, 7.34, and 8.36 yuan, respectively. The current stock price corresponds to PE of 11.8, 10.0, and 8.7 times, respectively, maintaining a “buy” investment rating.
Risk warning
Downward economic risk; risk of large fluctuations in product prices; risk of project construction falling short of expectations; risk of limited commencement of construction due to environmental protection policies; risk of downstream demand falling short of expectations.