Financial analysis of leading chemical enterprises

I. Profit analysis of chemical related listed companies

From the top ten stocks of stock price and net profit increase in 2021 and 2022Q1, it can be seen that enterprises in sub-industries such as fertilizer, chlorine alkali, soda ash and pesticides have strong profitability and high market attention. The main reason is that the profit margin continues to rise due to the sharp rise in product prices under the background of good supply and demand. The demand side of the fertilizer sector is rigid, and the supply side in the context of the Russia-Ukraine war, Russia, as an important fertilizer producer in the world, decided to stop fertilizer exports. Its nitrogen fertilizer, potassium fertilizer, phosphate fertilizer, urea production accounted for 23%, 18%, 15%, 14%, is the world's largest exporter of nitrogen fertilizer, the second largest exporter of potash fertilizer, the fourth largest phosphate fertilizer exporter, in the policy implementation is expected in the future global fertilizer supply or will tighten; Considering the need for the achievement of the annual economic growth target and stable growth, the real estate support policy is frequent, and the support of the demand side is relatively strong. On the whole, in the context of increased macro environmental uncertainty, the market pays more attention to the certainty of the demand side. (Report source: Future Think Tank)

Ii. Financial analysis of leading chemical enterprises

1.1 Wanhua Chemical: polyurethane short-term pressure, new material plate accelerated growth

The annual results were in line with expectations, and the advantages were further prominent after the expansion of production. In 2021, the company achieved operating income of 145.538 billion yuan, an increase of 98.19%; Net profit returned to the mother was 24.649 billion yuan, an increase of 145.47%, and the performance was in line with expectations. Polyurethane profit is basically stable, the annual polymerization MDI price increased by 37.45%, thermal coal price increased by 77.9%, the overall gross margin of 26.3%, the same as the same basis. In 2021, the company's polyurethane sales increased by 33% year-on-year, and the sales of petrochemical series increased by 75% year-on-year, and the advantages of expanded production were further prominent.

In the first quarter, the polyurethane price spread narrowed year-on-year, driving the overall gross margin down. In the first quarter of 2022, the company achieved operating income of 41.784 billion yuan, an increase of 33.44%, and net profit attributable to the mother of 5.374 billion yuan, a decrease of 18.84%. In the first quarter, the company's core product polyurethane boom has declined, polymerized MDI prices fell 4.9%, raw material thermal coal and pure benzene prices increased 41% and 43%, respectively, the company's overall gross margin fell 11.6% in the first quarter. From the sequential point of view, the MDI spread in the first quarter was slightly enlarged compared with the fourth quarter, and the gross margin increased by 3.5%.

Forward-looking layout of emerging materials, research and development costs increased significantly. In 2021, the company's R&D expenditure was 3.168 billion yuan, +55.07% year-on-year, and R&D investment continued to increase, and the company increased technology incubation investment around high-end chemical new materials and solutions, emerging materials and other new business segments. In 2021, the company's engineering construction is under construction 53 projects, of which 23 projects are being delivered. Construction in progress rose 26 per cent year on year. In 2021, the company's R&D expenditure was 3.168 billion yuan, an increase of 55.07%, and R&D investment continued to increase.

1.2 Hualu Hengsheng: The performance has steadily improved, and the multi-project layout construction has driven the development

The first quarter compared with the fourth quarter earnings improved, and the performance was steadily released. In 2021, the company achieved operating income of 26.636 billion yuan, an increase of 103%, and net profit attributable to the mother of 7.254 billion yuan, an increase of 303%. In the first quarter of 2022, the company achieved operating income of 8.115 billion yuan, an increase of 62.2%, and net profit to the mother of 2.429 billion yuan, an increase of 54.13%. In the fourth quarter of last year, the company experienced a sharp rise in coal prices after the process of falling back, the rising cost made the overall profit space slightly compressed, the whole body gross profit rate in the fourth quarter of about 26.54%, the quarter has declined. Entering the first quarter, the company's coal prices fell quarter on quarter, DMC projects, caprolactam projects to achieve full quarter operation, the company's single quarter profit hit a record high, an increase of about 48%, gross margin of 39.0%, an increase of 12.5%. At this stage, the company's product operation still maintains high load operation, and it is expected that product sales will increase from the first quarter.

The Dezhou site continues to carry out cost optimization and project development, and improve the layout chain of the existing production line. The company headquarters in Dezhou base, on the one hand, still continue to optimize and improve the existing production line, equal capacity replacement construction of efficient large capacity coal-fired boilers to replace the original old installation, continue to improve the existing production costs, and gradually put into production projects for further optimization and improvement, in order to continuously enhance the competitiveness of products; On the other hand, on the basis of existing products, the company continues to extend the development of new materials. In the planning and construction of high-end solvent projects and nylon 66 high-end new materials projects, through the project layout, on the one hand, it can further stabilize the multi-product co-production process, disperse the periodic profit pressure of some products, and at the same time, on the basis of traditional product layout, Extend to the field of new energy and new materials, break the limitation of the development space of traditional products, according to the company's calculation, after the two projects are put into operation, it will bring 7.9 billion yuan of revenue and 1.235 billion yuan of profit margin for the company, and further improve the central profit of the existing base.

The first phase of the Jingzhou Base project accelerated, and the green new energy and new materials project continued to advance. The company's first phase of Jingzhou Base project is still in full swing. The overall project construction is mainly focused on the company's niche products. On the basis of the first phase of project construction, the company further extends the green new energy and new materials project, layout NMP, BDO installation, PBAT, acetic anhydride and other products, and further extends the product on the basis of the first phase of project. To new energy materials, degradable plastics and other fields to extend the industrial chain layout, and continue to enrich the company's product types and industrial chain base in Jingzhou.

1.3 Yangnong Chemical: The first quarter performance exceeded expectations, and the operation ushered in an inflection point

First-quarter results beat expectations. In 2021, the company achieved a total revenue of 11.841 billion yuan, an increase of 20.5%; Net profit attributable to shareholders of listed companies was 1.222 billion yuan, up 1.02% year on year; In the first quarter of 2021, the operating income was 5.268 billion yuan, an increase of 42%. The net profit attributable to shareholders of listed companies reached 900 million yuan, an increase of 103.5% year-on-year, and the performance exceeded expectations.

After the third quarter of 21 years, the company's product price bottom reversal, although the current price has fallen quarter-on-quarter, but basically stable, and significantly increased year-on-year, we believe that the company's 22 years of product transaction price is higher than 21 years. From the perspective of product prices, the current price of the main pesticide product Kung-permethrin is 208,000 yuan/ton, the current price of bifenthrin is 300,000 yuan/ton, and the current price of the main herbicide product glyphosate is 65,000 yuan/ton. The company's glyphosate is mostly a long order, and the average transaction price in 22 years has increased compared with that in 21 years. In terms of fungicides, the company quoted 175,000 yuan/ton for phenacetoconazole, 248,000 yuan/ton for pyrazolium and 186,000 yuan/ton for propicoconazole. From the price point of view, September to October in 21 years, affected by the power rationing policy, the price of agricultural chemical products skyrocketed rapidly, October to December, with the impact of the power rationing policy faded, the price of agricultural chemical products fell back, 22 years January to February, pesticide products showed a high shock trend, we believe, The price of pesticide products will fluctuate at a high level in 22 years, and the company's earnings will continue to improve.

The fourth phase of Youjia has made a positive contribution to the performance. According to the company announcement and project acceptance report, part of the company's Youjia Phase 4 project has been put into production, and in December 2021, The project with an annual output of 3800 tons of bifenthrin, 1000 tons of fluridine, 6000 tons of nitramone, 3000 tons of phenacetoconazole, 2000 tons of propionoconazole and 3000 tons of acetophenone chloride and its by-products will be completed and commissioning will begin in January 2022. We believe that the fourth phase of the company will contribute positively to the company's 2022 performance.

1.4 Longbai Group: the performance in the first quarter met expectations, and the concentration degree increased the profit of the industrial chain

The gross profit margin of raw materials increased, and the net profit margin increased. In the first quarter of 2022, the company achieved revenue of 6.079 billion yuan, an increase of 30.49%, and realized net profit of 1.064 billion yuan, an increase of 0.03%. In the first quarter, titanium dioxide prices remained high, sales reached a record high, and revenue achieved substantial growth. In the first quarter, the price of titanium concentrate increased by 2% quarter-on-quarter, the price of sulfuric acid increased by 18.3% quarter-on-quarter, corresponding to the spread of sulfuric acid titanium dioxide decreased by 5.8%, the company's gross profit margin in the first quarter decreased by 5.2% quarter-on-quarter. In terms of expenses during the period, the company's third expense rate in the first quarter was 11.8%, down 6.6% from the fourth quarter, of which the sales expense rate and management expense rate fell by 1.6% and 3.9% respectively, driving the net interest rate increased by 1.6% from the quarter.

The industry concentration has increased to a stable profit in the industrial chain, and the company has significant cost advantages. With the deepening of supply-side reform and the accelerated integration of leading enterprises, the concentration of the domestic titanium dioxide industry has been improved, and the improvement of the competitive pattern has brought stability to the profitability of the industry. Since 2017, the overall gross margin of listed companies in the industry has stabilized at more than 30%, and Longbai has benefited from the advantages of its own scale, technology and partial self-sufficiency of raw materials. The gross profit margin is 5%-10% higher than the industry average, and the cost advantage is significant.

The new energy sector is advancing steadily, forming the second growth curve of the company. The company's phase 1 production line of 50,000 tons of iron phosphate/lithium iron phosphate, 25,000 tons of graphite negative electrode has been opened, will form sales this year, Phase 2 50,000 tons of iron phosphate/lithium iron phosphate, 75,000 tons of graphite negative electrode will also be prepared for construction this year, the next two years will form 350,000 tons of iron phosphate/lithium iron phosphate, 100,000 tons of graphite negative electrode production capacity, Form the second longest curve of the company.

1.5 Linglong tires: short-term performance setbacks in the dark hours, waiting for the industry to recover

Quarterly results missed expectations. In 2021, the company achieved operating income of 18.579 billion yuan, an increase of 1.07%; Net profit returned to the mother was 789 million yuan, down 64.48% year-on-year. In the first quarter of 2022, the operating income was 4.351 billion yuan, down 12.74% year-on-year; Net profit loss of 92 million yuan, down 118.57% year-on-year. The performance was lower than expected because the upstream and downstream of the industrial chain improved less than expected, and the epidemic repeatedly affected the company's production and sales.

Downstream demand decline coupled with trade friction, high prices of upstream raw materials superimposed sea freight skyrocketing, internal and external difficulties under the company's performance pressure. From the demand side, in 2021, the automotive market demand obstruction has an impact on the sales of tire supporting, the automotive market due to the shortage of chips in the global market has a cumulative production reduction of about 11.31 million, commercial vehicles are subject to the five countries and six standards switch, leading to a sharp decline in the demand for medium and heavy trucks; The demand for replacement markets is also weak in the context of repeated outbreaks. From the cost side, the main raw material prices in 2021 are in a high state of volatility, of which the average annual price of natural rubber and carbon black rose 25% and 52% respectively, under the cost pressure of the company's tire product gross margin fell 11% to 16.9%, of which the fourth quarter gross margin was only 6.2%. Considering that raw material prices are still at a high level, coupled with the impact of the epidemic on downstream demand, it is expected that the company's performance will still take time to recover.

The strategic plan is clear, the company continues to make efforts to support the market, and the achievements in the field of new energy are outstanding. The company deeply cultivates the original tire market, ranking first in China for many consecutive years, and has entered 7 of the world's top 10 automobile factories, with a total of more than 200 million pieces of supporting equipment. At the same time, in 2021, the sales growth rate in the field of new energy support reached 182%, and the overall market share was close to 20%, ranking first in domestic tires. Although the current overall industry is in a low period, the company's short-term performance loss, but in the global layout and adhere to the supporting strategy, the trend of long-term growth in the future remains unchanged.