Introduction to this report:

The company's three-quarter report fell short of expectations, but considering that the company's competitive advantage is still outstanding and multiple projects are about to be put into operation, it maintained an “increase in weight” rating.

Key points of investment:

Maintain an “Overweight” rating. Due to the company's Q3 performance falling short of expectations, the company's 2024-2026 EPS was reduced to 4.62/6.00/7.94 yuan, respectively (originally 6.27/7.51/8.50 yuan). Referring to comparable company valuations, the company was given 15.13 times PE in 2025, and the target price was maintained at 90.76 yuan.

The company's Q3 results fell short of expectations. The company achieved revenue of 147.6 billion yuan in the first three quarters of 2024, +11.35% year-on-year, and realized net profit to mother of 11.093 billion yuan, or -12.67% year-on-year. Among them, the company achieved revenue of 50.54 billion in the single quarter of 2024Q3, +12.48% year on year, and -0.73% month on month; net profit of 2.92 billion yuan in the single quarter, -29.41% year on year, and -27.33% month on month. In terms of profitability, Q3 gross profit margin was 13.4%, YoY -4.03pct, Q3 -1.91pct, Q3 net profit margin 6.59%, YoY -3.66pct, and -2.07pct month-on-month. We believe that the main reason why Q3's performance falls short of expectations is expected to be the Q3 company's multiple equipment maintenance, further pressure on product profits, and a month-on-month increase in costs.

Q3 Production and sales increased year-on-year, with a slight decrease month-on-month. According to the announcement, the company's total Q3 output was 3.13 million tons, +15% YoY, -7%; Q3 total sales volume was 3.23 million tons, +15% YoY and -1% month-on-month; Q3 ton revenue was 14,927 yuan/ton, +6% YoY and +6% month-on-month. Specifically, the polyurethane business achieved revenue of 18.8 billion yuan (+9% YoY, +5% month-on-month), 1.41 million tons of sales (+14% YoY, +2% month-on-month), and tonnage revenue of 0.0133 million yuan (-5% YoY, +2% month-on-month). Among specific varieties, demand performance for polymer MDI was good, mainly benefiting from the trade-in of home appliances, improved demand in the construction market, and stable external demand, but demand pressure for pure MDI, TDI, and polyether is high.

There are many layouts of polyurethane vinegar, petrochemicals and new materials, and many projects have ushered in a production period. Wanhua Chemical has always insisted on scientific and technological innovation as the first core competitiveness, continuously optimizing the industrial structure. Its business covers polyurethane, petrochemicals, fine chemicals and new materials industry clusters. (1) Polyurethane: In the first half of 2024, the company completed the Fujian MDI 0.4 million tons/year technical conversion project to 0.8 million tons/year, and announced that it plans to expand the capacity of the 0.8 million tons/year MDI plant in Fujian Industrial Park to 1.5 million tons/year MDI production capacity. (2) Petrochemical: Continue to promote the construction of key projects such as Ethylene Phase II and Penglai Phase I. (3) New materials: The company's POE project and citral business have all been put into operation, and the industrialization of more emerging businesses continues to advance.

Risk warning: Projects under construction fall short of expectations, and demand has dropped sharply.