Future judgment of chemical industry prosperity

Wanhua Chemical: continue to force research and development innovation, optimistic about the company's continued growth

Optimistic about Wanhua Chemical development into "China's BASF" : From the perspective of BASF's development history and industrial chain layout, it takes naphtha as the main raw material, steam cracking device as the core device, and extends downstream into chemical, characteristic products, functional materials, agricultural solutions and other subdivisions. The overall breadth and depth of the industrial chain are more than Wanhua, and the business layout is broader and the integration degree is higher. The proportion of BASF's traditional chemicals business has fallen to 25%, and the proportion of new materials and characteristic products has reached 57%, which is also the result of BASF's century-old enterprise constantly optimizing the industrial structure and layout.

Wanhua is currently inferior to BASF in the breadth and depth of the industrial chain, polyurethane business accounted for 54.5%, new materials accounted for only 9.07%, the gap is obvious, but Wanhua has the advantage of late, product structure layout will be more planning and development speed will be faster, easier to make their own characteristics. For example, in the field of polyurethane, Wanhua has the whole industrial chain of "IP-IPN-IPDA-IPDI" special isocyanates (HDI, HMDI and IPDI).

From the perspective of future strategic layout, BASF is shifting from the production of functional materials to providing solutions, while Wanhua is shifting from the production of traditional chemicals to expanding the market share of functional new materials. Wanhua's future development mainly focuses on the C2/C3/C4 industry chain and polyurethane industry chain to do the extension of high value-added products, nutrition, flavor and fragrance business, new material business, special coatings, water-based coatings business are all possible directions.

Continuous R&D and innovation, rapid growth of fine chemical and new material business: We believe that the new production of PC, TDI, MMA-PMMA and other heavy products in 19 years, the global sales volume is close to or more than 100 billion yuan, and the global oligopoly pattern, while the future water-based coatings, synthetic flavors, SAP and other products will continue to provide protection for their growth. Cash flow from operating activities remained high and capital expenditure continued to increase to ensure future growth: In the past 19 years, the company's net profit declined more than the same period last year, still maintained a basically flat operating cash inflow, polyurethane industry chain extension and supporting projects and ethylene projects at the same time to start construction is the main reason for the company's investment activities of cash flow increased. Optimistic about the company in the continuous research and development innovation and capital investment, the future with sustainable growth ability.

Profit forecast and investment advice: It is estimated that the company's net profit from 2019 to 2021 will be 102.59/122.25/15.381 billion yuan, corresponding to 16.0, 13.4 and 10.7 times PE respectively

Hualu Hengsheng: domestic high-quality coal chemical industry leading enterprises

Cost advantages brought by technology and management: 1) The company uses advanced clean gas technology to use bituminous coal (lignite) with lower price as the main production raw material and continuous technological transformation; 2) "one head and many lines" industrial chain advantage, flexible production; 3) Outstanding cost control ability, the company's period expense rate and management expense rate are only about half of comparable companies in the same industry.

Cyclical risk is gradually released: at present, most of the company's product prices have been lower than the historical average price, and there is little room for downward decline. The two historical lows of the company's products appeared around the beginning of 2010 and the beginning of 2016. In 2010, the company's main product structure was 1.2 million tons of ammonia alcohol, 1.5 million tons of urea, 250,000 tons of DMFand 350,000 tons of acetic acid. In 2016, the product price reached a new low, but the company's net interest rate and quarterly annualized ROE were about 7.5%, not only no new low but much higher than the level in 2010. The company's products in 2016 compared with 2010 more acetic acid expansion, compound fertilizer, adipic acid, melamine and butyl octanol; Some of these products, such as expanded acetic acid, adipic acid and other products, will increase ROE; More importantly, during this period, the company transformed and replaced the boiler, air separation and synthetic ammonia equipment, upgraded the technology, and the product cost continued to reduce, and the overall ROE was increased.

Sanyou Chemical: soda viscose head, waiting for the boom

The company is a domestic soda ash and viscose leading enterprise, with chemical fiber, soda ash, chlor-alkali, silicone four main businesses and supporting thermoelectricity, raw salt, alkali stone and other circular economy system of the industry leading enterprises, and the first in the country to "two alkali and one chemical" based, heat supply, fine chemicals and other as a supplement of the relatively perfect circular economy system, industrial synergy. It has a production capacity of 3.4 million tons of soda ash, 780,000 tons of viscose staple fiber, 530,000 tons of caustic soda, PVC55,000 tons and 200,000 tons of silicone.