Key points of investment:
The company released its 2024 quarterly report: In the first quarter of 2024, it achieved operating income of 46.161 billion yuan (YoY +10.07%, QoQ +7.84%), net profit of 4.157 billion yuan (YoY +2.57%, QoQ +1.07%), and net profit after deducting non-return to mother of 4.127 billion yuan (YoY +3.47%, QoQ +2.89%), which is in line with market expectations.
The business situation in the three major sectors: the MDI economy picked up at a bottom after the holiday season, and the polyurethane sector continued to expand as production capacity under construction was released one after another; the petrochemical sector clearly eased the Q1 cost side in Q1 in '24, and rising oil prices supported the sector's sentiment improvement; the new materials sector continued to expand, and the multi-project layout continued to expand the scale of the sector.
Demand for refrigerators and freezers remained high in 2024, and Q1 production and sales continued to grow year over year. Looking at domestic demand, according to customs data and statistics from the National Bureau of Statistics, the refrigerator industry, which accounts for half of the aggregate MDI demand, maintained growth in 24Q1. Among them, the cumulative export volume of refrigerators reached 17.79 million units, an increase of 34.1% year on year, with a cumulative output of 236.21 million units, an increase of 6.08% year on year; freezer sales also remained strong, with cumulative output of 7.355 million units in 24Q1, an increase of 28.8% year on year. 24Q1 The cold industry is in strong demand, and domestic demand for MDI continues to improve.
Cold demand was strong after the holiday season, while the supply side was more willing to raise prices, and the MDI boom picked up at the bottom of the first quarter. According to industry online statistics, in April 2024, the refrigerator production schedule was 11.23 million units, an increase of 10.1% over the previous year. Combined with the strength of the country's trade-in policy, demand for terminals continues to be strong.
Globally, there are still many overseas installations that maintain low load operation. Huntsman's 470,000 tons/year MDI plant in Europe is on rotation. The current load of Huntsman's 500,000 tons/year installation in the US remains around 70%, and overseas installations are expected to shrink. In the short term, as the traditional peak season for terminal refrigerators and air conditioners approaches, the MDI boom is expected to be strong in the first quarter, compounded by supply-side price increases. In the long run, by 2025, new production capacity will be invested mainly in 10,000 yuan. At that time, Wanhua Chemical's MDI global market share is expected to be close to 40%, which is beneficial to the profits of large-scale enterprises.
High R&D investment+high capital expenditure supports long-term development. The certainty and expectations of seeking cyclical growth are poor. In the long term, they are optimistic that Wanhua will fully develop into a leader in the global chemical industry. The company's future growth goals are clear, and the five-year plans for each base have surfaced one after another. The Yantai and Fujian bases will continue to build integrated parks. Modified plastics and PBAT at the Meishan base are progressing smoothly, which is expected to rely on local natural gas resources to expand downstream; the company invests 20-30 billion in R&D every year to provide strong technical support, and large-scale capital expenditure over the next 5 years will accelerate the industrialization of technology reserves. It has long been optimistic that Wanhua will fully develop into a new platform-based chemical materials company and grow into a leader in the global chemical industry.
Profit forecast and valuation: Maintaining the company's 24-26 profit forecast, it is expected to achieve net profit of 18.5.2, 201.7, and 25.99 billion yuan. The current market value corresponds to PE valuations of 15X, 14X, and 10X, maintaining a “buy” rating.
Risk warning: The commissioning of new projects falls short of expectations; downstream demand falls short of expectations.