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WANHUA CHEMICAL GROUP(600309):Q4 PERFORMANCE DROPS BUT STIL

  WANHUA CHEMICAL GROUP(600309)锛歈4 PERFORMANCE DROPS BUT STILL HAS GROWTH POTENTIAL 銆€銆€Company Profile

  Wanhua Chemical Group Co., Ltd. is specialized in the development, production and marketing of chemical products. Net sales break down by family of products as follows:

  -polyurethane (51.7%);

  -petrochemicals (31.6%);

  -fine and specialty chemicals (9.5%);

  -other (7.2%).

  China accounts for 50.3% of net sales. (Source: Reuters)

  Event

  Wanhua Chemical (鈥渢he company鈥? released its 2022 Preliminary Earnings Estimate.

  The company is expected to achieve a revenue of CNY165.57 billion for 2022, a year-on-year increase of 13.76%.

  The net profit attributable to shareholders is expected to reach CNY16.239 billion for 2022, down 34.12% year-on-year. The earnings per share is estimated at CNY5.17, based on the latest outstanding shares.

  For Q4, the company鈥檚 revenue is estimated at CNY35.145 billion, down 8.04% year-on-year and 14.91% month-on-month. The net profit attributable to shareholders is expected to reach CNY2.631 billion for Q4, down 48.48% from a year ago and 18.42% from the previous quarter.

  Comments

  Affected by the pandemic spreading in China and the high inflation in Europe and the United States, the global economic growth has slowed down. The company鈥檚 product demand has weakened, and the product price and price spread have narrowed, dragging down the company鈥檚 revenue and profit to a certain extent in Q4, 2022.

  At present, the company has abundant project reserves, which will boost the its grow in the future. Amid the tightening of the security environment domestically and the setting of the goals for carbon peaking and carbon neutrality, the company鈥檚 competitive advantage is expected to be further expanded, so it still has a safety margin with the current market cap.

  The company is one of the few global leading enterprises in China鈥檚 chemical industry that has globally cutting-edge manufacturing technologies and outstanding management strengths.

  Although the MDI industry has high concentration and building new equipment is an arduous and time-consuming task, the company has been devoted to R&D for technological breakthroughs. The company is able to make great leaps rapidly in its capacity with low costs, which consolidates its position as the No.1 in the world.

  The company鈥檚 C3/C4 and large ethylene phase-I plants are running smoothly. Its phase II project for ethylene has been approved. The company has also introduced multiple plans in petrochemical industrial parks in China, which are set to improve its layout in the petrochemical industry chain and bring synergism with its business in other segments.

  The company鈥檚 new material projects have been put into production one after another. Relying on R&D, the company takes the lead in introducing layout for new energy materials, essences and flavors, ADI, nylon-12, etc. In the future, the plans will diversify the company鈥檚 products and enhance its presence in the industrial chain.

  The company has an excellent governance structure. It is making great strides towards becoming a global leader in polyurethane, an important supplier of olefin and derivatives in China, and a core supplier of new materials.

  Earnings forecast and investment recommendation

  We revise our forecast of the company鈥檚 EPS forecast to CNY5.17, CNY6.18 and CNY7.00 for 2022, 2023 and 2024, respectively.

  We maintain the rating of 鈥淏uy鈥?

  Potential risks

  Poorer-than-expected global macroeconomy; strong fluctuations in raw material prices.

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