The Zhitong Finance App learned that Tianfeng Securities released a research report saying that in 2024, the Q1 chemical sector faced only multiple low levels (price, ROE, inventory, PB) since 2000. In particular, industry PB had already fallen to a low level since 2000 in Q1 of '24. The bank's recommendations are based on the two main lines of hard assets and prosperity: focusing on high-quality development to “hard assets”. The main recommendations are: Wanhua Chemical (600309.SH), Hualu Hengsheng (600426.SH), and Yangnong Chemical (600486.SH). Seek structural opportunities in economic recovery. Demand is resilient, and the agrochemical and tire sectors are expected to gradually usher in economic recovery; the titanium dioxide, fluorine chemicals, phosphate chemicals, and soda ash sectors are expanding in an orderly manner on the supply side or supply is limited.

Tianfeng Securities's main views are as follows:

Last week's key product price tracking reviews

WTI oil prices rose 0.2% to $78.26 per barrel last week. Focus on sub-industries: heavy soda ash/acetic acid/urea/light soda/viscose filament/calcium carbide PVC prices rose 6.8%/4.1%/3.7%/2.8%/1.1%/1%, respectively; TDI/DMF/spandex/silicone/pure MDI/ethylene glycol/viscose short fiber prices fell 4.7%/2.6%/0.7%/0.7%/0.5%/0.4%; rubber/vinyl PVC/solid methionine/VA/liquid methionine/white titanium powder/caustic soda powder/VE/DIMDIM Prices remain unchanged.

The top five chemical products that rose last week: natural gas (Texas) (+18.9%), natural gas (HenryHub) (+16.1%), CBOT wheat (+11.4%), main coking coal (+10.7%), and oxalic acid (+7.1%).

Acetic acid: During the week, an enterprise in the acetic acid market in North China reduced production load for a week due to equipment failure. Mainstream manufacturers in central China suddenly stopped due to a fault, and the overall inventory of the market was still running low. The downstream of the northwest region is less stocked before the holiday. There are restocking operations after the holiday. Combined prices are relatively low, and the shipping situation is relatively good. Prices are leading the rise due to market supply. Manufacturers in other regions are not under much inventory pressure, and prices have continued to rise.

Soda ash: Domestic soda ash prices rose regionally last week. Jiangsu Shilian began maintenance at the beginning of last week. As a result, supply in the province was reduced, there were no low-price sales, and high-price transactions. However, many enterprises resumed full production after the holiday season, and overall domestic supply increased, especially in the Qinghai region. Last week, the company had to issue orders, and production and sales were basically in balance, supporting strong prices in the soda ash market.

Chemical sector market performance last week

The basic chemicals sector rose 4.17% from last week, and the Shanghai and Shenzhen 300 Index rose 1.72% from last week. The basic chemicals sector outperformed the Shanghai and Shenzhen 300 Index by 2.45 percentage points, ranking 6th among all sectors in terms of growth. According to Shenwan's classification, basic chemical sub-industries saw the biggest weekly gains: phosphorus chemicals and phosphates (+11.4%), paint and ink manufacturing (+10.43%), inorganic salts (+9.42%), glass fiber (+8.19%), and potash (+6.32%).

Focus on sub-sector views

In 2024, the Q1 chemical sector faced only multiple low levels (price, ROE, inventory, PB) since 2000. In particular, industry PB fell to the low level since 2000 in Q1. Since the growth rate of domestic chemical construction peaked in Q2 in '22, the pressure to invest in additional production capacity has dampened profit expectations in the chemical sector. The bank recommended two main lines: hard assets and boom:

Focus on high-quality development as a “hard asset”: Key recommendations: Wanhua Chemical, Hualu Hengsheng, Yangnong Chemical

Seek structural opportunities in economic recovery: agrochemical and tire sectors with strong demand resilience and are expected to gradually usher in economic recovery; titanium dioxide, fluorine chemicals, phosphate chemicals, and soda ash sectors that are expanding in an orderly manner on the supply side or supply is limited. Key recommendations: Yangnong Chemical; Recommended attention: Linglong Tire, Sailun Tire, Senkirin, Longbai Group, Sanmei Co., Ltd., Juhua Co., Ltd., Yonghe Co., Ltd., Yuntianhua, Yuanxing Energy.

Focusing on investment opportunities in the field of cutting-edge materials, the application of synthetic biology and catalysts in the chemical field is expected to usher in broad development space. Key recommendations: Huaheng Biology and Kaili New Materials (joint coverage with the Metals and Materials Group).

Electronics industry cycle recovery: Key recommendations: Wanrun Co., Ltd.; Recommended attention: Walter Gas, Jinhong Gas, China Shipbuilding Special Gas, Guangzhou Steel Gas, Ruilian New Materials, Wright Optoelectronics, and Olaide.

Risk warning: risk of large fluctuations in the price of raw materials such as crude oil; risk of drastic expansion of production capacity; risk of production safety and environmental protection; demand for chemicals falling short of expectations.