Wanhua Chemical released its first quarterly report for 2018. During the reporting period, it achieved operating income of 13.602 billion yuan, an increase of 23.57% year-on-year; gross profit of 4.581 billion yuan, an increase of 39.88%; and net profit attributable to listed company shareholders of 3.546 billion yuan, a year-on-year increase. 61.53%; Net profit attributable to shareholders of listed companies after deductions was 3.224 billion yuan, an increase of 48.78% year-on-year. Based on the total share capital of the latest 2.634 billion shares, the earnings per share for the first quarter was 1.30 yuan (after deduction of 1.18 yuan). Single-quarter operating cash flow of 1.31 yuan per share.
Comments:
Wanhua Chemical performed well in the first quarter of 2018 and exceeded market expectations. We speculate that the company's sales of polyurethane products have risen in price. Meanwhile, new production capacities such as PCs have been gradually put in place, which has helped boost operating performance.
1. The operating income grew well, the comprehensive gross profit rate increased, and the fee rate decreased during the period.
The company's 18Q1 achieved an operating income of 13.602 billion yuan (+23.57% year-on-year, -3.94% over the previous quarter), a consolidated gross profit margin of 43.03% (+3.8pct, +1.45pct quarters), and a period expense rate of 7.70% (year-on-year -0.52pct, month-on-month basis). 0.85pct). We analyze, the company's revenue growth is good, gross margin has improved, mainly due to the increase in production and sales volume of main products, and the increase in average selling price.
In terms of period expenses, the company's 18Q1 sales expense rate was 2.59% (year-on-year -0.17pct, ring-to-0.08pct), overhead expense ratio was 3.28% (year-on-year -0.30pct, quarter-to-quarter ratio -1.10pct), and financial expense ratio was 1.82% (+0.06pct on year-on-year basis). , MoM +0.32 pct). In addition, the company’s non-recurring gains and losses for the current period were 322 million yuan (+293 million yuan year-on-year, -0.38 billion yuan quarter-on-quarter), which was mainly the government grants included in the current profit and loss.
2, the company's polyurethane, fine chemicals and new materials prices rose.
The overall output of the main product grew well, and sales increased year-on-year. 18Q1: The company's three main categories of main products achieved operating revenue of 12.706 billion yuan (+24.48% year-on-year, -3.25% QoQ), and other products realized revenue of 896 million yuan (17Q1- Revenue from other products of 18Q1 was stable at 8.0 to 1.03 billion yuan.) The three main types of main products totaled 888,200 tons of actual production (+13.78% year-on-year, +5.59% on a chain basis), achieving sales of 1,128,500 tons (+9.33% over the same period of last year). Ring - 6.63%).
Continuing capacity expansion, polyurethane, fine chemicals and new materials production increased significantly year-on-year; 17Q4-18Q1 multi-device routine maintenance, Q2 production and sales chain or a larger space for improvement.
In terms of output, the output of polyurethanes, petrochemicals, fine chemicals and new materials increased by 20.81%, 1.80%, and 51.65% year-on-year, respectively, an increase of -5.60%, 54.53%, and 12.65% year-on-month, respectively. Thanks to the company's multi-device capacity expansion over the past year Newly built and started to raise, the output of the three major products have increased substantially year-on-year.
In terms of sales volume, sales of polyurethanes, petrochemicals, fine chemicals and new materials increased by 10.30%, 7.38%, and 30.63% year-on-year, respectively.
Polyurethanes, fine chemicals and new materials drive sales prices. 18Q1, the company's polyurethane, petrochemicals, fine chemicals and new materials, the average price of sales rose 21.49% year-on-year, -2.35%, 2.04%, an increase of 12.93% quarter-on-quarter, -16.75 %, 9.23%; It can be seen that the average sales price of PU products has increased significantly year-on-year and month-on-month. The ASP of fine chemicals and new material products has increased significantly compared to the previous month, while the average price of petrochemical products has dropped slightly. (The average price calculation of petrochemical products includes LPG trading. We analyzed that the average selling price of polyurethane products was mainly driven by the high price of MDI products. The average sales price of fine chemicals and new materials products was mainly due to the production of 18Q1 polycarbonate products, and the continuous optimization of the plate product structure brought about.
3, Polyurethane product prices to promote or promote the company's 18Q1 performance of the main driving force; In addition to the new investment of 70,000 tons of PC capacity to bring 18Q1 greater profitability.
We speculate that the main cost of the company's polyurethane products is basically the same. The company's polyurethane products are mainly composed of bulk isocyanates (currently MDI products) and polyether polyols; the main raw materials for the production of MDI and polyether polyols are aniline and propylene oxide, respectively. Since Wanhua currently supports 1,080,000 tons of aniline production capacity (Yantai, Ningbo factory total), we speculate that the unit variable cost of Wanhua Chemical's polyurethane product production (yuan/ton) is mainly determined by the price of pure benzene and propylene oxide. (The main raw material for pure benzene aniline production; the company has propylene oxide products, but it is a petrochemical segment accounting). According to our market tracking data, the market price of 2018Q1 pure benzene East China (deductible value-added tax) is 0.57 million yuan / ton ( Year-on-year -0.09 million yuan/ton, +0.015 million yuan/ton on a month-over-month basis; during the same period, the market price of epoxy propane propane (deductible value-added tax) was 10,500 yuan/ton (+0.16 million yuan/ton over the same period, +0.02 million yuan on a chain basis). / Ton). Based on this calculation, the average unit variable cost (RMB/ton) of the 18Q1 polyurethane product production was basically the same as that of the previous quarter.
Costs remained flat, prices rose, and polyurethane products showed significant performance gains. In 2018Q1, the company's average selling price of polyurethane products was RMB 18,400/ton (+0.32 million yuan/ton over the same period, +0.21 million yuan/ton over the previous quarter); The cost is basically the same, so the unit price rise is directly reflected in the increase in unit gross profit. It can be roughly estimated based on the sales volume of polyurethane products of 2018Q1, which is 440,000 tons (+20% year-on-year, -6% ring-on-quarter). It can be seen that the polyurethane products promote the company. The main driving force for the improvement of 18Q1 performance.
PC production brings profit. The company's 70,000-ton PC project was completed and put into operation on January 23, 2018. It fully utilized the synergies between the company's business chains and effectively reduced the costs of raw material transportation and storage. Increased the company's market competitiveness; According to 18Q1 PC (East China) product prices of 26,000 yuan / ton (deductible value-added tax) and a good level of gross margins measured, it shows that PC production has also brought about a significant increase in profits.
4. The price of MDI continues to support the price of polyurethane products. The booming industry season is expected to continue.
The average sales price of polyurethane products rose, taking into account the small proportion of polyether polyol products, and the relatively stable prices (18Q1 market average price increased by approximately 10-20% year-on-year, and by 1-3% from the previous quarter). We speculate that MDI sales are uniform. The price increase drove the company's polyurethane product sales average price upward.
The prices of MDI products have risen sharply since 2017, and the trend of high prices for 2018Q1 has basically remained. From the MDI listing price analysis of the China market published by Wanhua Chemical, we can see that the price of 2018Q1 pure MDI listings continues to be high, with a year-on-year and month-on-month increase. Aggregate MDI The listing price has also basically maintained the high price for ten years (Note: the listing price is the guidance price at the beginning of the month). According to the customs data, the export price of MDI for Wanhua also keeps rising. The average export prices of pure MDI and aggregated MDI 18Q1 are in the historical period. The highest level.
Due to the technical difficulties of the new MDI installations and the long construction period (which takes about 6 years), the globally foreseeable effective new production capacity will be clear and mostly small-scale technological transformation by 2020; the superposition device will take about 1-2 months per year. Due to the normal overhaul and the frequent occurrence of force majeure on supply constraints, MDI's global supply is expected to remain tight in the short to medium term. This is also the core reason why MDI prices have continued to rise since 2017.
5, Solid polyurethane, the focus of petrochemical and new materials; Continuously improve the industrial chain layout, consolidate the position of the world leader in isocyanate, make great strides towards global polyurethane heads and important suppliers of Chinese olefins and derivatives.
On March 23, 2018, Wanhua Chemical Co., Ltd. stated that it has successfully achieved breakthroughs through long-term technical investment and is expected to achieve an 800,000-ton capacity leap in a relatively short period of time. This will allow us to grasp the highly tight global MDI supply opportunities and realize profitability. A substantial increase in thickness will reinforce the position of the global MDI industry leader. In addition to the MDI business, the follow-up company's polyurethane segment will have 300,000 tons of TDI products put into production by the end of 2018, and the sales volume of polyether polyols will also continue to increase.
At present, the company has started two projects including one million tons of ethylene projects and high value-added extensions of the industry chain. On the one hand, PVC, EO, etc. in the ethylene project complement Wanhua polyurethane industrial chain short boards to ensure high load stability in the isocyanate industry. Operation and supply of key and difficult to transport raw materials for the polyether industry; on the other hand, use existing industrial chain and ethylene project as key raw materials to develop high value-added projects. In 2018, the company will put into operation the second phase of 130,000 tons/year of PC. 50,000 tons/year MMA, 80,000 tons/year PMMA and other projects, and preparation and development of SAP, water-based coatings and other industries; the company will insist on the innovation of technology, process, product and resource balance to further realize the horizontal/vertical orientation of the industrial chain. Efficient use of energy will enable Wanhua to diversify its business. In 2020, it will strive to become a global leader in the isocyanate industry. In 2025, it will strive to realize its goal of becoming an important supplier of olefins and derivatives in China. Wanhua Chemical's transformation.
6. The orderly advancement of major asset restructuring: It is proposed to purchase MDI related assets including Wanhua Chemical's assets including, but not limited to, issuance of shares to purchase assets, absorption and merger.
Since December 6th, 2017, Wanhua Chemical announced that the controlling shareholder Wanhua Industrial intends to suspend its business and related to the overall listing. It has been nearly five months since the suspension of the transaction. On March 1, 2018, Wanhua Chemical and Wanhua Chemical signed The “major asset reorganization framework agreement” states that Wanhua Chemical will adopt, but not be limited to, issuing shares to purchase assets, absorb mergers and other means to purchase the equity of Wanhua Chemical's subsidiaries or absorb Wanhua Chemical; the latest progress announcement on April 27, 2018 The major asset restructuring work is still further progressing. The company is actively communicating with the state-owned assets supervision and management departments and other agencies on this matter, and further consults with counterparty counterparties on related issues.
Wanhua Chemical Co., Ltd. is the newly established company after the separation of Wanhua Industrial, the controlling shareholder of the original listed company. The actual controller is Yantai SASAC; according to the separation plan, the original Wanhua Industry holds and has been allocated to some companies of Wanhua Chemical. The equity mainly includes several MDI related assets: (1) 47.924% equity of Wanhua Chemical; (2) 25.5% equity of Wanhua Chemical (Ningbo); and (3) 100% equity of Yantai Xinyi Investment (main assets are indirectly held BorsodChem 100% stake)).
BC's products include MDI, TDI, PVC, and are mainly for the European market. A small number of products are sold in the Middle East, Africa, and Asia. As of October 2016, the Wanhua Industry Bulletin announced that BC has an MDI capacity of 300,000 tons/year. The TDI production capacity is 250,000 tons/year, the PVC production capacity is 400,000 tons/year, and the caustic soda production capacity is 369,000 tons/year. At the same time, the BC Company has a number of projects under construction, including the hydrochloric acid oxidation project and the chlor-alkali production capacity expansion project. Will further enhance the company's production capacity.
As BC Corporation and Wanhua Chemical have major business segments, Wanhua Industrial has made a commitment to prohibit competition from the industry after the acquisition of BC and in 2011 it has hosted BC Corporation in Wanhua Chemical for management and operation (2017). Wanhua Chemical confirms custody fee income including total tax amounting to RMB 10 million.) After experiencing losses for four consecutive years, BC Company achieved a small surplus in 2014-2016, but the company’s asset-liability ratio in the past three years still maintained 96.4%. , 94.8%, 89.3% of the high position, the company's operating risk is high, and the debt pressure is relatively high. According to the response of Wanhua Chemical to the Shanghai Stock Exchange inquiry letter in April 2017, taking into account the BC company's financial risk is expected to be substantially reduced, The sustainable operation capability is expected to be basically available. Wanhua Industry will solve the competition problem of Wanhua Chemical and BC in a merger before September 21, 2018.
According to the above announcement, we reasonably speculated that this major asset restructuring of Wanhua Chemical will be placed in the MDI related assets held by the original Wanhua Industry, including the minority shareholders equity of Ningbo Wanhua, the equity of BorsodChem, etc. The purchase of the corresponding assets will enable the listed company The total profit volume has reached a higher level. Wanhua Chemical is aiming at overall listing and continues to promote internal integration. Wanhua Chemical is the sole listed platform for the chemical industry under the control of the controlling shareholder, fulfilling the avoidance and settlement of peer competition, and maintaining the independence of the listed company. Sexual commitment to achieve better development.
7. Maintain “buy” investment rating. Wanhua Chemical is one of the few global leading companies in China's chemical industry with internationally advanced manufacturing technologies and outstanding management advantages. MDI is an oligopolistic market, and new installations are technically difficult to construct. Long, MDI's global new production capacity foreseen by 2020 is mostly small-scale technological transformation; Wanhua Chemical, with long-term technical input, has successfully achieved breakthroughs and is expected to achieve an 800,000-ton capacity leap in a relatively short period of time. Grasp the current high level of global MDI supply opportunities and consolidate the status of the global MDI industry leader. The company’s C3/C4 petrochemical plant operates smoothly, LPG trade scale continues to expand; and 1 million tons ethylene plant under construction is listed as the key to the conversion of new and old kinetic energy in Shandong Province. The construction project is expected to work together to strengthen the advantages of polyurethane plates and deepen the layout of the petrochemical industry chain. At the beginning of the year, the company’s 70,000-ton PC project was completed and put into production at the beginning of the year. In the future, several new projects such as TDI, MMA, PMMA, and Phase II PC will be launched one after another. The categories can be further diversified, and the industrial chain support can be further improved, helping the company to reach global polyurethane heads and suppliers of important olefins and derivatives in China. Marked a big step forward. Not consider the asset injection, we maintain the company in 2018 ~ 2020 EPS, respectively, to 4.73, 5.31, 6.02 yuan prediction, maintain 'Buy' rating.
8. Risk Warning: Product price fluctuates, demand recovery is less than expected, capacity delivery progress is lower than expected, and industry competition is intensifying.