The chemical industry will usher in certain growth opportunities

1. The chemical industry boom has fallen, and it is recommended to embrace definite growth opportunities in 2022

1.1 Review of the overall situation of the chemical industry: industry revenue and profit increased significantly year-on-year, reaching a record high

The revenue and net profit of the chemical industry increased significantly year-on-year. In the first three quarters of 2021, the chemical (Shenwan) industry achieved operating income of 4,184.94 billion yuan, an increase of 36.4% over the same period last year, and achieved net profit of 280.71 billion yuan, a significant increase of 147.9% over the same period last year, reaching a record high. The gross profit margin of the industry was 20.9%, an increase of 2.05 percentage points, and the net profit margin was 7.5%, a significant increase of 3.32 percentage points. In the first three quarters of the chemical industry, operating income and industry profitability increased significantly, net profit to the mother was the highest point in the industry in recent decades, and the overall gross margin and net interest rate of the industry increased significantly. In terms of expense ratio, according to wind Consulting data, in the first three quarters of 2021, the four-expense ratio of the chemical industry totaled 7.35%, down 1.56 percentage points year-on-year, and the management expense ratio increased by 0.40 percentage points year-on-year to 2.91%. The sales expense ratio decreased by 0.35 percentage points to 2.30%, the finance expense ratio decreased by 0.06 percentage points to 0.87%, and the research and development expense ratio increased by 0.41 percentage points to 1.28%.

1.2. By sector: the profit of chemical raw materials sector increased the most, and the profit of rubber and plastics sector declined

The profits of chemical raw materials, petrochemical, chemical products and chemical fiber sectors increased significantly by 596.2%, 166.7%, 148.5% and 103.0%, respectively. We analyzed the income and net profit changes of the chemical (Shenwan) secondary sub-plate, and found that since the beginning of this year, the revenue growth rate of all secondary chemical sub-plates is more than 20%, of which the cumulative income of chemical fiber and chemical products plate is significantly increased by 56.2% and 47.7%, respectively. The revenue growth rate of chemical raw materials, petrochemical, plastics and rubber segments ranges from 20% to 40%. In terms of profits, the growth rate of chemical raw profits in the first three quarters of this year increased significantly by 596.2%, the growth rate of petrochemical, chemical products and chemical fibers was more than 100%, while the profits of plastics and rubber sectors declined, down 8.4% and 9.6% respectively.

1.3. The economy is falling and embracing certain growth

Since the beginning of this year, benefiting from the double good superposition of the domestic market and overseas exports, commodity prices have continued to rise, which has brought systematic improvement to the profits of chemical enterprises. On the demand side, under the impact of repeated overseas epidemics and extreme weather, the demand for some overseas chemical products has shifted to China; On the supply side, under the influence of dual-control energy consumption and dual-carbon policies, the supply of a variety of chemical production capacity is limited. Increased overseas demand, limited domestic supply, superimposed on the strong support of upstream crude oil prices, and the phenomenon of rising raw materials for most chemical products in 2021. According to wind information data, among the 418 enterprises in the chemical (Shenwan) sector (excluding ST, B shares and undisclosed new shares), the net profit of the mother in the first three quarters of this year achieved positive growth of 290, of which 43 in the first three quarters of the mother net profit growth rate of more than 500%. From a long-term logical point of view, as the overseas epidemic is effectively controlled, overseas production capacity will gradually recover, commodity prices may fall from the current high to a reasonable range, and the recent PPI and domestic demand data continue to decline, to a certain extent, also supports our view

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2. Look for investment opportunities in the chemical industry from the perspective of valuation

2.1. The overall valuation of the industry has been at the central level in the past 10 years, and the valuation of viscose, soda ash, Velen and other sectors is low

As of December 13, the overall price-earnings ratio of Shenwan Chemical sector (TTM_overall method excluding negative value) was 19.98X, and the price-to-book ratio (overall method excluding negative value) was 2.91X. In terms of price/earnings ratio, the current overall valuation level of the chemical industry is at the median level of nearly 10 years; In terms of price-to-book ratio, the current overall valuation level of the chemical industry is at a higher position in the past 10 years. In the molecular sector (excluding petrochemicals), the valuation of fluorine chemicals and refrigerants, daily chemical products, paint and ink manufacturing, other rubber products and potash fertilizer is higher, respectively, 76.47X, 62.47X, 57.92X, 46.98X and 46.31X, the valuation is more than 45 times. While viscose, spandex, nitrogen fertilizer, soda ash, chlor-alkali, Vinylon, textile chemicals, polyester, phosphate fertilizer and other 9 sectors have lower valuation, only 7.45X, 8.21X, 11.14X, 12.24X, 13.13X, 13.43X, 13.65X, 14.18X, 14.45X, respectively. The valuation is below 15 times; In addition, compound fertilizer, polyurethane, carbon black, glass fiber and other sectors are also worth noting, the P/E ratio is 15.25X, 15.79X, 17.04X, 17.60X, all lower than the average P/E ratio of the industry.