Leading fluorine chemical companies continue to improve the industrial chain layout.

The company is a leading fluorine chemical company, mainly engaged in R&D, production and sales of fluorine chemical products such as fluorocarbon chemicals and inorganic fluorine products. The company's fluorocarbon chemicals mainly include fluorine refrigerants and fluorine foaming agents. The company's current production capacity of R32, R125, R134a, R143a, R22, R142b, and R141b is 0.04 million tons/year, 0.052 million tons/year, 0.065 million tons/year, 0.01 million tons/year, 0.0144 million tons/year, 0.0042 million tons/year, 0.0356 million tons/year, and above The products are all supply constrained products. The company's 2024 quotas are 0.0278 million tons, 0.0315 million tons, 0.0515 million tons, 0.0063 million tons, 0.0095 million tons, 0.0095 million tons, 0.0017 million tons, and 0.0145 million tons, respectively. At the same time, the company relies on the resource advantages, existing products, brands and capital advantages of the New Materials Industrial Park, and takes new fluorine-containing materials as the main direction. Based on the existing industrial layout, the company extends the fluorine chemical industry chain, enriches the company's product structure, and promotes industrial transformation and upgrading.

Strong supply constraints are compounded by rigid demand, and the refrigerant boom continues to rise.

① Strong supply restrictions: The refrigerant supply is highly restrictive. The quota policy limits the upper limit of refrigerant production in China. At the same time, the domestic use and export of quotas and production quotas for various refrigerant manufacturers are clearly divided. The refrigerant supply side is refined and the restrictions are strong.

② Demand rigidity: Downstream refrigerants are mainly household air conditioners, automobiles, etc., which account for a low cost and are essential for refrigeration. According to IEA forecasts, the total space cooling output capacity of global residential air conditioners will increase from about 6,200 GW in 2016 to nearly 23,000 GW in 2050, with a compound growth rate of 4%. At the same time, due to factors such as patents, costs, and safety, it is difficult for fourth-generation refrigerants to replace existing refrigerant varieties in the short term, and demand for second-generation and third-generation refrigerants is rigid.

Against the backdrop of strong supply constraints and demand rigidity, the refrigerant supply and demand pattern continued to be optimized, and price differences continued to rise. As of September 4, 2024, the average market prices for R32, R125, R134a, and R22 were 0.0355 million yuan/ton, 0.0295 million yuan/ton, 0.033 million/ton, and 0.033 million yuan/ton, up 108.8%, 7.3%, 20.0% and 61.0% respectively; the price difference was 0.0224 Million yuan/ton, 0.0139 million/ton, 0.019 million/ton, and 0.0242 million yuan/ton increased by 414.2%, 14.7%, 70.9%, and 101.5%, respectively. The company is a leading refrigerant company and is expected to fully benefit from the upward profit center brought about by the rise in the refrigerant boom.

Actively expand the fluorine chemical industry chain and steadily advance project construction.

Relying on the resource advantages, existing products, brands and capital advantages of the New Materials Industrial Park, the company takes new fluorine-containing materials as the main direction. Based on the existing industrial layout, the company extends the fluorine chemical industry chain, enriches the company's product structure, and promotes industrial transformation and upgrading. Currently, the company has laid out projects: 3,000 t/a (phase 1 is 500 t/a) lithium bisfluorosulfonimide (LiFSI) project, 5,000 t/a polyperfluoroethylene propylene (FEP) and 5,000 t/a polyvinylidene fluoride (PVDF) project, 6,000 t/a lithium hexafluorophosphate (LiPF6) and 100t/a high-purity phosphorus pentafluoride (PF5) project, 1,200t/a hexafluoroethane (R116) project, and 20,000 t/a high-purity electronic grade hydrofluoric acid project. In the future, as the company's fluorine material products are put into production one after another, the company's profit margin will be further opened up.

Investment advice

Against the backdrop of strong supply constraints and rigid demand, the refrigerant boom continues to rise. As a leading refrigerant company, the company's profit center is expected to continue to rise. The company is expected to achieve operating income of 3.92, 4.63, and 5.27 billion yuan respectively from 2024 to 2026, and achieve net profit of 0.88, 1.29, and 1.61 billion yuan. The corresponding PE is 19X, 13X, and 11X, respectively. The first coverage gave the company a “buy” rating.

Risk warning

(1) Industry policy risks;

(2) Product substitution risk;

(3) macroeconomic risks;

(4) Risk of fluctuations in raw material prices;

(5) Downward risk of overseas demand.