occurrences

On October 29, the company released its 2024 three-quarter report: in the first three quarters of 2024, the company achieved operating income of 147.604 billion yuan, +11.35%; realized net profit to mother of 11.093 billion yuan, -12.67% year over year; weighted average return on net assets was 12.10%, a decrease of 3.60 percentage points over the previous year. The gross profit margin on sales was 15.38%, down 1.38 percentage points from the previous year; the net profit margin was 8.33%, down 2.12 percentage points from the previous year.

Among them, Q3 2024 achieved revenue of 50.537 billion yuan, +12.48%, and -0.73% month-on-month; realized net profit to mother of 2.919 billion yuan, -29.41% year-on-year and -27.33% month-on-month; average return on net assets was 3.16%, down 1.85 percentage points year on year and 1.21 percentage points month-on-month. The gross profit margin on sales was 13.40%, down 4.03 percentage points from the previous year and 1.91 percentage points from the previous year; the net profit margin was 6.59%, down 3.66 percentage points from the previous year, and 2.07 percentage points from the previous year.

reviews

The company's 24Q3 performance declined sequentially due to the downturn in some product sentiment compounded the impact of maintenance. 2024Q3 achieved net profit of 2.919 billion yuan to mother, -1.098 billion yuan month-on-month. Among them, gross profit was -1.025 billion yuan month-on-month, sales expenses were +0.092 billion yuan month-on-month, management expenses were +0.032 billion yuan month-on-month, R&D expenses were +0.09 billion yuan month-on-month, and income tax was -0.176 billion yuan month-on-month. The company's gross profit declined month-on-month. On the one hand, due to the decline in the sentiment of some products, according to Wind, the TDI-toluene price difference reached 6581 yuan/ton, -7.22% month-on-month; the MTBE price difference reached 2,235 yuan/ton, -21.80% month-on-month; PC-BPA price difference reached 5934 yuan/ton, -8.19% month-on-month; on the other hand, the price of HDI reached 2,9087 yuan/ton, -4.22% month-on-month; on the other hand, the company's maintenance increased in the third quarter, with MDI and TDI production at Bauseed sites in Yantai and Hungary Able to 7 Production will be suspended for 45 days and 40 days of maintenance, respectively, starting January 16th.

By sector, the 2024Q3 polyurethane sector achieved revenue of 18.79 billion yuan, +8.55%, month-on-month +4.66%, sales volume of 1.41 million tons, +13.71% year-on-month, +2.17% month-on-month, average price of 13,326 yuan/ton, -4.54% YoY, +2.43% month-on-month; the new materials sector achieved revenue of 7.02 billion yuan, +10.92% YoY, +2.14% month-on-month, YoY +16.28% Compared to +4.17%, the average price reached 14041 yuan/ton, -4.60% YoY and -1.95% month-on-month; the petrochemical sector achieved revenue of 22.4 billion yuan, +42.73% YoY and +6.37% month-on-month.

New projects are progressing in an orderly manner, and I am optimistic that the company will continue to grow

As a leading global polyurethane and chemical company, the company has significant scale advantages. At the same time, the company is actively expanding production capacity. By the end of the third quarter of 2024, the company's projects under construction reached 69.724 billion yuan, accounting for 65.95% of fixed assets. In the polyurethane sector, the company plans to further expand Fujian MDI production capacity from 0.8 million tons/year to 1.5 million tons/year, expand TDI production capacity to 0.33 million tons/year, and also build the Fujian TDI phase II project; the petrochemical sector, the 0.9 million tons/year PDH plant in Penglai Phase I and the 1.2 million tons/year ethylene plant in Yantai are progressing in an orderly manner. Ethylene, propylene and downstream high-end polyolefin projects will continue to broaden the industrial chain; fine chemicals and new materials sector, the company New products such as citral and POE will be launched one after another, and the benefits are expected to be gradually released. As the company's major projects continue to be implemented, the company is expected to continue to grow in the future.

Joining hands with overseas leaders to build an integrated olefin project, the company's petrochemical profitability is expected to increase. On July 24, the company announced that Abu Dhabi National Petroleum Company, Nordic Chemical, and Boru Chemical will form an investment consortium, and Wanrong New Materials will form a Sino-foreign joint venture according to the intention of 50%: 50% shareholding ratio under the premise of approval in accordance with relevant laws and regulations, mainly using Nordic Chemical's advanced proprietary Borstar? Technology to jointly launch a feasibility study on the construction of a special polyolefin integrated facility with a production capacity of 1.6 million tons/year in Fuzhou, Fujian Province. Borealis's proprietary Borstar? Polyolefin products manufactured by technology have strong competitive advantages. At the same time, investment consortia including Borouge Chemical's rich experience in specialty polyolefin production (including various raw material routes including ethane), and Wanhua's advantages in the ethane supply chain (including ethane raw material costs, terminal resources, VLEC, production processes, etc.) together form an excellent economic foundation for joint venture projects based on ethane raw materials. In addition to the Fujian olefin project, the company used ethane as a raw material in Yantai Ethylene Phase II; at the same time, the raw material for Yantai Ethylene Phase I was diversified. After the transformation, the raw material was changed from propane to ethane.

Compared with other raw materials, ethane cracking to ethylene has obvious cost advantages, and the process yield is higher. As the share of ethane feed in the company's petrochemical sector continues to increase, profitability is expected to continue to increase.

Profit forecasting and valuation

We expect the company's 2024-2026 net profit to be 14.806/18.078/21.127 billion yuan, EPS 4.72/5.76/6.73, respectively. The corresponding PE price is 16.88/13.82/11.83 times the current price. Wanhua Chemical is a leading global polyurethane and chemical company. The main products MDI and TDI have high technical barriers. At the same time, the company continues to be driven by R&D, and new projects are progressing in an orderly manner. The future is growing at a high rate, maintaining a “buy” rating.

Risk warning

The progress of new production capacity construction falls short of expectations, the contribution performance of new production capacity falls short of expectations, fluctuations in raw material prices, changes in environmental protection policies, a sharp decline in the economy, and sharp fluctuations in propane prices.