Zhitem Financial app learned that Changjiang Securities released a research report stating that in the first half of 2024, the chemical industry achieved an operating income of 1237.63 billion yuan, a year-on-year increase of +4.2%. The current expansion cycle of most chemical products is basically over, and the supply and demand balance is improving. Overall, the chemical industry continued to fluctuate during the first half of 2024. In the tire industry, both revenue and performance increased, the market remained strong, and the domestic demand was robust, with continued strong exports. Chinese tire companies have significant advantages in cost control and global layout. In the phosphorus chemical industry, the supply of phosphorus ore is tight, and the prosperity is expected to continue, with phosphate fertilizers about to enter the traditional peak season; in the fluorine chemical industry, with the quota policy being implemented, the refrigerant market saw a significant improvement in the first half of the year.

Overall operation: Digesting the incremental supply and experiencing fluctuating prosperity in the first half of 2024, leading to improved performance.

In the first half of 2024, the chemical industry achieved an operating income of 1237.63 billion yuan, a year-on-year increase of +4.2%; net income attributable to the parent company was 75.25 billion yuan, a year-on-year increase of +0.8%. On the export side, overseas markets entered a restocking cycle, leading to improved exports. Since Q2, major overseas economies have weakened, raising expectations of interest rate cuts by the central banks. On the domestic demand side, real estate continued to decline, and social retail data indicated lower-than-expected consumption. In terms of supply, the current expansion cycle of many chemical products is basically over, leading to an improved supply-demand balance. Overall, the chemical industry continued to fluctuate during the first half of 2024.

Tires: Both revenue and performance increased, and the market remained strong.

In the first half of 2024, the tire sector achieved a total operating revenue of 50.5 billion yuan, a year-on-year increase of 16.8%, and a net profit attributable to the parent company of 5.74 billion yuan, a year-on-year increase of 72.7%. The domestic demand is robust, and exports continue to be strong. Chinese companies have significant advantages in cost control and global layout. It is recommended to pay attention to the rising opportunities of domestic tire companies such as Sailun Tire, Linglong Tire, Sentury Tire, Jiangsu General Science Technology and Guizhou Tire.

Phosphorus Chemicals: The prosperity at the mining end continues, and the fertilizer industry is gradually entering a good phase.

In the first half of 2024, the phosphorus chemicals sector achieved a total revenue of 56.33 billion yuan, a year-on-year decrease of 4.2%, and a net income of 4.39 billion yuan, a year-on-year increase of 16.5%. With a tight supply of phosphorus ore, the prosperity is expected to continue, and phosphate fertilizer is about to enter the traditional peak season. It is recommended to pay attention to high dividend targets Yunnan Yuntianhua, Hubei Xingfa Chemicals Group, which actively repurchases and cancels shares and completes employee stock ownership plans, and Guizhou Chanhen Chemical Corporation, a high-growth target for phosphorus ore.

Fluorine chemicals: With the implementation of quota policies, the refrigerant industry has significantly improved in the first half of the year.

In the first half of 2024, the fluorine chemicals sector achieved a total revenue of 18.06 billion yuan, a year-on-year increase of 20.0%, and a net income of 1.48 billion yuan, a year-on-year increase of 70.9%. With supply restrictions from quotas, the prosperity is expected to continue to rise. Pay attention to Zhejiang Juhua, Zhejiang Sanmei Chemical Industry, Dongyue Group, etc.

Polyurethane: Profit under pressure in the first half of the year, and the prosperity is expected to recover.

In the first half of 2024, the polyurethane sector achieved a total revenue of 109.32 billion yuan, a year-on-year increase of 10.8%, and a net income of 8.37 billion yuan, a year-on-year decrease of 4.7%. The production data for household appliances in the first half of the year was good, but demand in other downstream sectors was weak, and export boost was limited. Looking ahead, the traditional peak season of 'Golden September, Silver October' is gradually approaching, strengthened expectations of a rate cut by the Fed, and demand is expected to recover steadily. On the supply side, domestic facilities face an intense maintenance period, while overseas facilities suffer from unforeseen circumstances, leading to shortages or exacerbation, and the outlook for MDI prosperity is expected to improve. Pay attention to Wanhua Chemical Group.

Polyester filament: Profit recovery quarter by quarter, peak season is approaching.

In the first half of 2024, the polyester filament sector achieved a total revenue of 79.49 billion yuan, a year-on-year increase of 22.1%, and a net income of 1.67 billion yuan, a year-on-year increase of 185.7%. Enterprises showed self-discipline in the second quarter, with significant improvement in efficiency. Since July, the plummeting crude oil prices have led to poor purchasing sentiment downstream, coupled with significant pressure from falling inventory prices, resulting in certain promotional discounts by companies. Since mid-August, equipment utilization rates in Jiangsu and Zhejiang have increased, entering the traditional peak season in September, with demand expected to further improve. Pay attention to Tongkun Group, Xinfengming Group.

Titanium dioxide: Continued high prosperity in the ore end, titanium dioxide awaits recovery.

In 2024H1, the titanium dioxide sector achieved a total operating income of 22.67 billion yuan, a year-on-year growth of 9.7%, and a net income attributable to shareholders of 2.22 billion yuan, a year-on-year growth of 49.1%. Looking ahead, as the global capacity expansion of titanium dioxide slows down and driven by steady growth in global end demand and supported by the price of upstream raw materials titanium concentrates, the medium to long-term outlook for titanium dioxide is expected to gradually recover. Pay attention to LB Group Co., Ltd.

Additives: Some bottom varieties have reversed the business cycle.

In 2024H1, the additives sector achieved a total operating income of 56.19 billion yuan, a year-on-year growth of 7.9%, and a net income attributable to shareholders of 6.02 billion yuan, a year-on-year growth of 25.3%. Some varieties such as vitamins have been positively impacted by supply-side factors, and the business cycle has reversed. Pay attention to Meihua Holdings Group with high dividend yield.

Electronics chemicals: Semiconductor market is recovering, upstream materials are expected to see increased volume.

In 2024H1, the electronics chemicals sector achieved a total operating income of 34.48 billion yuan, a year-on-year growth of 15.3%, and a net income attributable to shareholders of 3.68 billion yuan, a year-on-year growth of 32.8%. The sales of semiconductors have significantly increased, benefiting the demand for electronic gases, wet electronic chemicals, and photoresist.

Investment advice: Bullish on investment opportunities in the chemical industry. The supply and demand situation is improving and the business cycle is on an upward trend. It is recommended to pay attention to investment opportunities with high dividend yield, high-alpha, high elasticity, high growth, and growth stocks.

Risk warning

1. Lower than expected demand; 2. Project progress is lower than expected; 3. Safety and environmental risks in production; 4. Increased competition risk.