Wanhua Chemical's Performance Draws Attention: Revenue Breaks Through 100 Billion Yuan, Net Profit Declines Year-on-Year, Where Is the Future Growth Point?

Wanhua Chemical has officially released its 2024 interim financial report, which details the company's financial performance and business conditions during the reporting period. According to the report, the company achieved a total operating revenue of RMB 97.067 billion during the reporting period, representing a significant year-on-year increase of 10.77%. However, in terms of net profit attributable to the parent company, the company experienced a slight decline, reaching RMB 8.174 billion, a year-on-year decrease of 4.60%. After excluding non-recurring gains and losses, the company's net profit attributable to the parent company was RMB 8.099 billion, a year-on-year decrease of 2.54%. Additionally, the net cash flow from operating activities was RMB 10.291 billion, a decrease of 8.29% compared to the same period last year.

During the first half of the year, the global polyurethane industry saw continued growth in market demand, but the profitability of the petrochemical industry remained low. It is worth noting that the demand in the refrigeration, automotive, and overseas construction industries has shown growth, while the supply fluctuations of some overseas plants have led to the continued high prices of pure benzene, which has had a driving effect on the prices of polyurethane products. Affected by factors such as fluctuations in international crude oil market prices and insufficient downstream demand in the petrochemical industry, the overall profitability of the petrochemical industry, although slightly recovering, remains relatively low.

In its 2024 interim report, Wanhua Chemical stated that the company achieved operating revenue of RMB 97.067 billion, up 10.77% year-on-year; net profit attributable to the parent company was RMB 8.174 billion, down 4.6% year-on-year; and net profit attributable to the parent company after excluding non-recurring gains and losses was RMB 8.099 billion, down 2.54% year-on-year. Specifically, the company's performance in the second quarter was particularly outstanding, with operating revenue of RMB 50.906 billion, up 11% year-on-year and 10% quarter-on-quarter; however, net profit attributable to the parent company was RMB 4.017 billion, down 11% year-on-year and 3% quarter-on-quarter.

In terms of business, both polyurethane and new material sales volumes achieved year-on-year growth, with the performance of the fine chemicals and new materials business being particularly impressive. In the first half of the year, the company achieved polyurethane series business revenue of RMB 35.455 billion, up 8.19% year-on-year, with a sales volume of 2.69 million tons, up 14.47% year-on-year, but the average selling price fell 5.48% year-on-year; petrochemical series revenue was RMB 39.575 billion, up 9.53% year-on-year, but the sales volume was down 60% year-on-year; the fine chemicals and new materials business series revenue reached RMB 12.979 billion, up 15.23% year-on-year, with a sales volume up 24.32% year-on-year, but the average selling price also fell 7.32% year-on-year.

Additionally, the sustained high prices of pure benzene have also had a certain impact on the company. According to Baiinfo data, the average price of Qinhuangdao coking coal Q5500 in the second quarter was RMB 857.64/ton, down 6.19% quarter-on-quarter; the price of propane was RMB 5,196.74/ton, up 0.73% quarter-on-quarter; the price of butane was RMB 5,342.98/ton, up 3.24% quarter-on-quarter; and the price of pure benzene reached as high as RMB 9,038.06/ton, up 9.74% quarter-on-quarter. Against this backdrop, the company's gross profit margin in the first half of the year was 16.41%, down 0.01 percentage points year-on-year, and the period expense ratio was 5.5%, up 0.67 percentage points year-on-year.

The company has continued to optimize its product structure, and the differentiated product development work has steadily progressed. In the HDI product field, with the successful commissioning of the 180,000-ton adipic diamine project, the HDI industrial chain has been further improved, and the company's market competitiveness has continued to strengthen. At the same time, the MDI capacity has increased significantly from 400,000 tons/year to 800,000 tons/year. The commissioning of the bisphenol A project has further enriched the PC industrial chain, helping to improve the company's market share and profitability. In addition, the company's 200,000-ton/year POE project has been successfully commissioned, and the industrialization of emerging businesses such as citral and fragrances is also progressing steadily.

The company has signed important agreements with partners such as ADNOC, and the ethane cracking project will bring new growth points for the company. At the signing ceremony held in Beijing, Wanhua Chemical, Wanrong New Materials, Abu Dhabi National Oil Company (ADNOC), Borealis, and Borouge jointly signed a "Project Cooperation Agreement". The project will rely on Borealis' advanced Borstar technology and ethane cracking process, combined with Borouge's rich experience in the production of specialty polyolefins and Wanhua's advantages in the ethane supply chain, to jointly build a highly economical joint venture project. In the future, the ethane cracking project will become a new growth point for the company.

According to forecasts, the company's net profit attributable to the parent company will reach RMB 17.061 billion, RMB 22.176 billion, and RMB 25.463 billion in 2024-2026, respectively, with earnings per share (EPS) of RMB 5.43, RMB 7.06, and RMB 8.11, respectively. The corresponding price-to-earnings (P/E) ratios are 13.8 times, 10.6 times, and 9.2 times, respectively. Based on this, the company maintains a "buy-B" rating.

However, the economic recovery may not be as strong as expected, leading to a decline in product prices and an increase in raw material prices. Specifically, the company's operating costs reached RMB 81.135 billion, up 10.78% year-on-year; at the same time, other costs such as expenses also increased to RMB 5.862 billion, up 23.41% year-on-year. After deducting operating costs and various expenses, the company's net profit attributable to the parent company was RMB 8.174 billion, down 4.60% year-on-year.

In view of the operating conditions in the first half of the year, Wanhua Chemical has decided to implement a half-year profit distribution plan. The plan is to distribute a cash dividend of RMB 0.52 per share (including tax) based on a total share capital of 3.14 billion shares as of June 30, 2024, paying a cash dividend of RMB 5.20 per 10 shares, with a total distribution of RMB 1.633 billion. This fully demonstrates the company's commitment to shareholder returns and care for investors.