The Zhitong Finance App learned that Guoxin Securities released a research report saying that with the implementation of quota management, deepening supply-side structural reforms, and concentrated industry competition patterns, while downstream demand continues to grow steadily and demand from new fields and emerging markets develops rapidly, the bank is optimistic that third-generation refrigerants will continue to recover, and the supply and demand pattern will improve, and leading third-generation refrigerant manufacturers will usher in a significant recovery and recovery in business performance. It is recommended to focus on leading fluorine chemical companies with complete industrial chains, complete infrastructure facilities, leading scale, and advanced process technology.

Related targets: Juhua Co., Ltd. (600160.SH), Sanmei Co., Ltd. (603379.SH), Yonghe Co., Ltd. (605020.SH), Haohua Technology (), etc. 600378.SH

Incident: Recently, refrigerants have begun an upward boom cycle, and prices have clearly picked up. According to Fluorine Online data, as of February 22, domestic core factory prices in the R22 market were 21500-2,250 yuan/ton; R134a had risen to 31000-32,000 yuan/ton; R32 market ex-factory price was around 21000-25,000 yuan/ton, and high-end price increases have been increasing one after another; some R125 companies have risen smoothly from the factory to 38,000-45,000 yuan/ton; R410a is being implemented smoothly due to strong raw materials R32 and R125 markets; R410a is currently being implemented in the market due to strong raw materials R32 and R125 market implementation 30,000 to 35,000 yuan/ton, smooth delivery in the dealer market boosts the continuous promotion of products. R143 sold at 57,000 yuan/ton, mixed with R404 and R507 traded at 49,000 yuan/ton.

Guoxin Securities's views are as follows:

The Montreal Protocol has promoted the upgrading of global fluorine refrigerants. A three-generation refrigerant quota plan has been introduced, and domestic four-generation technology reserves are in place.

The quota for second-generation refrigerants continues to be cut, and will be further drastically cut in 2025. In 2020-2022, China's refrigerant manufacturers are in a position to seize market share of third-generation refrigerants. Currently, competition is clearly easing; at the beginning of 2024, China's new round of second-generation refrigerant quotas and the first third-generation refrigerant quotas have already been issued. In 2024, China's HFCS production baseline value is 1,853 million tCO2 (including 65% HCFCs production baseline value is about 441 million tons), HFCS usage baseline value is 905 million tCO2 (including imported baseline value of 0.05 million tCO2, including 65% HCFCs usage baseline value of about 298 million tons); total import quota is 100 million tCO2. On January 11, 2024, the Ministry of Ecology and Environment announced the production and use quotas for each enterprise and product in detail: in 2024, the production/domestic use quota for third-generation refrigerants in China was 74.56/34 million tons, respectively. Furthermore, in terms of fourth-generation refrigerants, the application of R1234yf, R1234ze, etc. in China is in its infancy. Currently, companies such as Juhua Co., Ltd., Sanaifu, and Zhongxin Fluorine Materials have implemented or stored corresponding technology. In the future, fourth-generation refrigerants will become a green alternative to third-generation HFC refrigerants due to their excellent performance and environmental friendliness.

The prospects for refrigeration demand are still broad, and the industry pattern has been optimized. Currently, third-generation refrigerants have reversed their bottom and entered an upward channel.

In the long run, the global air conditioning market will continue to grow, and industries such as cold chain/heat pumps/new energy vehicles will open up space for refrigerant demand; the upgrading of fluorine refrigerants has brought market opportunities for the development and product upgrades of leading fluorine refrigerant companies. After experiencing a period of economic fluctuation and decline since Q4 of 2021, overall refrigerant prices, led by R143a and related mixed refrigerants, have rebounded rapidly in the fourth quarter of 2023, boosted by multiple factors such as the peak season for traditional refrigerant preparation, low inventory in early companies and markets, and expectations of implementation of quota plans. Entering 2024, with the implementation of the quota rules plan, superimposing beautiful air conditioning schedule data for the first year, the combination of interest rate policies to help ease the difficult situation in the real estate market, and some enterprises stopped work and maintenance, etc., refrigerants continued the upward trend, and the prices of most domestic products such as R143a, R125, R404, R507, and R32 rose further.

Looking ahead to the future market, as quota management has been implemented, supply-side structural reforms continue to be deepened, and downstream demand continues to grow steadily, and downstream demand continues to grow steadily, the bank is optimistic about the continued recovery of third-generation refrigerants, and leading third-generation refrigerant manufacturers are expected to significantly recover their business performance. The future development trend of the global refrigeration industry is to develop more energy efficient, more stable and efficient heat exchangers, compression systems, and more environmental/recyclable refrigeration materials to improve refrigeration safety, technical strength, energy efficiency level, environmental performance, and moderately reduce charging volume. With the continuous deepening of application fields such as high-performance and high-value-added fluorine products in the next few years, the rapid development trend of China's fluorine chemical industry is expected to continue.

Risk warning: refrigeration demand falls short of expectations; policy risks (stricter environmental protection policies for fluorine refrigerants, accelerated upgrading process, changes in quota issuance policies, etc.); global trade frictions and export blockages; sluggish real estate cycle prosperity; production progress of various companies' projects falls short of expectations; rising raw material prices; chemical production safety risks, etc.