Wanhua Chemical (600309): Stable Performance, Excellent Cash Flow, MDI Bottom Area Change

Event: The company released the third quarter report of 2019 and achieved revenue of 485.

3.9 billion, a decrease of 12 per year.

48% (for reference only); net profit attributable to mother is 78.

9.9 billion, a decrease of 41 every year.

75% (remarks); EPS 2.

52 yuan / share.

MDI prices bottomed out, performance met expectations, and cash flow performance was excellent.

The company achieved revenue of 485 in the first three quarters of 19 years.

3.9 billion, a decrease of 12 per year.

48%; gross profit margin 29.

82%, a decrease of 11 per year.

69PCT; selling expenses 20.

2.8 billion, an increase of 14 every year.

91%, management costs 10.

3.8 billion, a decrease of 7 per year.

74%, financial expenses 7.

71ppm, a decrease of 7 per year.

23%, R & D expenses 12.

1.2 billion, an increase of 2 every year.

65%; net interest rate 16.

27%, a decrease of 8 per year.

18PCT.

Q3 single-quarter revenue reached 17 billion yuan, an increase of 9 from the previous quarter.

07%; net profit attributable to mother 22.

7.8 billion, down 19 from the previous month.

36%.

In the first three quarters, the sales volume of polyurethane series / petrochemical series / fine chemicals and new materials series products were 196.

48/265.

37/28.

33 inches, an increase of 37 per year.

81% /-8.

45% / 28.

16% (excluding the BC merger in 18 years); sales of polyurethane series / petrochemical series / fine chemicals and new materials series in Q3 of 19 were 64.

51/118.

88/10.

76 inches, an increase of 35 per year.

12% / 10.

43% / 33.88% (without considering the 18-year BC merger), an increase of -2 from the previous month.

52% / 78.

43% / 13.

24%; the average sales price of polyurethane series / petrochemical series / fine chemicals and new materials series products in the single quarter was 11,737 / 4,312 / 16,731 yuan / ton, which was gradually reduced by 25.

35% / 14.

83% / 10.

76%, down 5 from the previous month.

77% / 17.

69% / 6.

78%.

The growth rate of the company’s performance was mainly due to the decline in the prices of major products in the context of the decline in the global economic growth rate; it was difficult to improve trade friction between China and the United States, and export costs increased, so performance was affected.

Against the backdrop of the current industry downturn, the company achieved 78 in the first three quarters.

9.9 billion return to mother net profit (Q1: 27.

96 billion, Q2: 28.

25 billion, Q3: 22.

7.8 billion), but achieved 131.

2.2 billion net operating cash flow (Q1: 45.

0.6 billion, Q2: 37.

79 billion, Q3: 48.

3.7 billion), although Q3’s performance has declined month-on-month, cash inflows have increased significantly, showing a strong industry position and superior profit quality.

The prices of main products fluctuated significantly, and the bottom area of MDI prices fluctuated.

In the first three quarters of 19, the company’s average MDI listing price was 23,511 yuan / ton, a year-on-year decrease of 23.

72%; the average listing price of aggregated MDI direct sales was 15,567 yuan / ton, which was a decrease of 34.

01%; the average listing price of aggregated MDI distribution was RMB 15,244 /南宁桑拿 ton, a continuous decline of 34.

76%.

In the single quarter of the third quarter of 19, the company’s average MDI listing price was 20,800 yuan / ton, a year-on-year decrease of 32.

98%, down 19 from the previous month.

07%; the average listing price of aggregate MDI direct sales is 15,167 yuan / ton, which is gradually decreasing by 28.

91%, down 13 from the previous month.

83%; Aggregate MDI distribution listings are 15,000 yuan / ton, a continuous decline of 29.

69%, down 12 from the previous month.

28%.

In terms of petrochemical products, the average price of PO, acrylic acid, butanol, butyl acrylate, NPG, and MTBE was RMB 7,749 / t, RMB 9,851 / t, RMB 7,336 / t, RMB 6,423 / t, and RMB 8,562 / t in the third quarter of 19Tons, 8,951 yuan / ton, 5,874 yuan / ton, and later fell by 14.

7% / 18.

9% / 15.

7% / 18.

35% / 19.

1% / 35.

2% / 7.

2%. According to the MDI data of Tiantian Chemical Network, the price of polymerized MDI started to rise steadily since mid-June, and the price of polymerized MDI (median price) in East China rebounded from the lowest of 11,250 yuan / ton in mid-June to 13,500 yuan / ton in early AugustThe average price in October was 12,610 yuan / ton; the pure MDI (median price) in East China rebounded from the lowest of 16,850 yuan / ton in mid-July to 20,000 yuan / ton in early August. The average price in October was 17,396 yuan / ton.

According to the company announcement, the aggregate MDI distribution list price in October was 16,500 yuan / ton, up 1,000 yuan / ton from September; the aggregate MDI direct listing price was 16,000 yuan / ton, up 500 yuan / ton from September; the pure MDI listing price was 21,700RMB / ton, unchanged from September ranking.

The price of raw materials for MDI in 19 also dropped sharply. The average price of pure benzene in the first three quarters of 19 was 4,898 yuan / ton, a year-on-year decrease of 25.

88%. Since mid-August, the price of pure benzene has picked up slightly, and the average price in October was 5,592 yuan / ton.

Affected by the macro economy, the growth rate of MDI demand has fallen, but the current MDI price is located in the historical bottom area, reaching the cost line of some enterprises, and foreign companies will reduce production or repair in an orderly manner, and suppliers are quite pricey.

Wanhua Chemical surpassed the lowest cost advantage of the global industry. At the current bottom price, it can still maintain a better level of performance and long-term profit stability.

On July 31, the company announced the acquisition of Swedish International Chemicals in an attempt to prevent the proliferation of its MDI technology, and the MDI industry continued to maintain an oligopoly.

Integration continues to advance, and gradually continues to decline, and is expected to grow into an international first-class chemical new materials company.

The company is developing from the polyurethane industry to the diversified petrochemical field, the fine chemicals and new materials field, the industry chain is highly integrated, the integration process is continuously promoted, and it is gradually declining and the anti-risk capability is enhanced.

At the end of 2018, the phosgene method PC device and TDI device were successfully started at one time; In January 2019, the MMA device and the PMMA device were successfully put into production; the SAP project and the PC phase II are expected to be launched in the fourth quarter of 19Less flexibility.

The million-tonne ethylene project was fully started in December, 2018. The project also supports 40 new PVC, 45 LLDPE, 35 HDPE, 30 PP, 15 epoxy resin, 30/65 pounds PO / SM,With 5 butyl butadiene and other units, the million-ton ethylene project will be put into operation at the end of 20 years, and Wanhua’s ceiling will be further opened.

In the long run, Wanhua has mastered technological innovation, high incentives for talents and continuous investment, and strives to grow into an international first-class chemical new materials company.

Maintain “Highly Recommended-A” investment rating.

We forecast the company to achieve revenue 661 from 19-21.

38 billion, 765.

6.1 billion and 977.

1.5 billion yuan, achieving net profit attributable to mother 101.

39 billion, 122.

2.8 billion and 167.

0.8 billion, with EPS of 3.

23 yuan, 3.

89 yuan and 5.

32 yuan, PE is 13 times, 11 times and 8 times respectively, maintaining “strongly recommended-A” investment rating.

Risk reminder: the risk that MDI prices will continue to fall, the risk of reasonable capacity building, and the risk of continued macroeconomic downturn