MDI price trend

Research purposes:
Since July 2020, the prices of polymerized MDI and pure MDI have continued to rise. Wanhua Chemical has increased the listing prices of polymerized MDI and pure MDI in China for three consecutive months. Why did the price of MDI rise? Can MDI prices continue to rise? This is the question we hope to answer in this report.

main conclusion:
MDI prices have risen sharply, on the one hand, driven by the demand side, on the other hand, the supply contraction caused by maintenance. Since May, overseas demand has driven the export of domestic refrigerators and freezers. At the same time, demand in automobiles, pipe insulation, and aldehyde-free panels has improved, which has led to a substantial increase in MDI demand. On the supply side, global MDI device production overhauls and force majeure events frequently occur. Our analysis is mainly due to the increased pressure of losses from international competitors and the forced shutdown of the devices, resulting in price surges.

In the next six months, we predict that MDI's profitability is still expected to remain at a relatively high level. While there is still maintenance on the MDI supply side, demand is the dominant factor affecting prices. At present, the export demand for refrigerators and freezers has increased significantly. On the one hand, overseas demand has improved, and on the other hand, overseas refrigerators and freezers have been blocked. In the new crown epidemic In the context of the second increase, the strong demand for refrigerators and freezers abroad is still expected to maintain. While the domestic epidemic is effectively controlled, demand in the fields of automobiles, pipeline insulation, and aldehyde-free boards is expected to continue to improve.

From a longer-term perspective, we pay more attention to the cost barriers and development trends of Wanhua Chemical in the MDI field compared to competitors. We find that Wanhua Chemical has a huge cost advantage over its competitors and continues to expand.

profit prediction:
It is estimated that the company's net profit attributable to the parent in 2020-2022 will be 84.94, 13.538, and 16.933 billion yuan, respectively, and the corresponding PE will be 29, 18, and 15 times respectively. The rating of "strongly recommended" is maintained.

Risk warning: economic downside risks; project construction less than expected risks; market fluctuation risks; new products less than expected risks; environmental protection and safety production risks; risks of increased competition in the same industry.