Wanhua Chemicals reported a net profit cut at the waist

In the economic downturn, the performance of the past white horse stocks suddenly changed, making investors seem to have stepped into minefields. On the evening of August 20, 2019, Wanhua Chemicals (600309.SH), which has been called "Chemical White Horse Stock" by the market, also showed a phenomenon of net profit being almost cut at the waist.

According to the performance report issued on the same day, the company's operating income in the first half of this year was 31.5 billion yuan, down 15% from the same period, and its net profit was 5.6 billion yuan, down 46% from the same period. The non-net profit deducted by shareholders of listed companies decreased by 49.03% compared with the same period last year.

Wanhua Chemicals (600309.SH) has been closely related to its special market position. The company is mainly engaged in polyurethane (MDI, TDI, polyols), propylene and its downstream products research and development, production and sales. At present, the production technology of MDI has been monopolized by a few manufacturers such as Basf and Huntsman in the world. Wanhua Chemistry (600309.SH) is currently the largest MDI manufacturer in the world. Its products are widely used in chemical industry, light industry, textile, construction, household appliances, building materials, transportation, aerospace and other fields. This makes Wanhua Chemicals (600309. SH) always hold a higher profit margin. MDI has a high technical threshold because it involves dozens of gases such as benzene, nitrobenzene, hydrogen and carbon monoxide in the production process. These gases cannot be transported over long distances and can only be generated on site. Therefore, the production of MDI can not be achieved in a single factory, and a series of factories must be linked together. Any slight mistake will result in a complete shutdown of a bunch of factories. People in the industry often lament, "There are 100 reasons for the shutdown of a hundred MDI factories".

In February 2019, Wanhua Chemistry (600309.SH) completed its overall listing, which is also the first half-year report card handed over by the "top student" after the overall listing.

For the sharp decline in performance, Wanhua Chemical (600309.SH) explained that this was because "during the reporting period, the profitability of the company's products was affected by the slowdown in global economic growth, the decline in the price of main products and the increase in export costs." Although the company "adopts strategies, actively responds to the new market situation and challenges, and carries out organizational management model reform", it still fails to stop the embarrassing situation of profit being cut at the waist.

According to market statistics, in the first half of 2019, the price of MDI declined sharply compared with 2018. The price of pure MDI decreased by 5,000 yuan or 6,000 yuan per ton, and the price of aggregated MDI declined even more. In January this year, for example, the aggregated MDI price for distribution was 12 500 CNY/ton, compared with 28 800 CNY/ton in the same period last year, which dropped by more than half. In July, Wanhua chemical pure MDI bulk water was listed at 19,500 CNY/ton, barreled at 20,000 CNY/ton, down 3,700 CNY/ton from June. At present, the MDI industry is beginning to show a trend of higher profit application market layout downstream. For example, Huntsman and Basf have begun to compress the production of MDI raw materials and extend to the downstream application market.

Generally speaking, MDI products are bulk basic raw materials (pure MDI, polymerized MDI) with relatively low profit, and downstream application products (such as automobile, paint, construction, pipeline, etc.) with high added value. The former is characterized by high sales volume, low profit, daily fluctuations in prices and large fluctuations in the market, which have impacted the steady operation of enterprises. The latter has many subdividing fields. Although it is difficult to develop technology and market, the added value of products is high, which is conducive to the sustainable development of enterprises.

According to Wanhua Chemistry Zhongbao, the company has also made a "related diversification" of petrochemical series, fine chemistry and new material series products, and generated nearly 10 billion yuan of revenue.

Wanhua Chemistry believes that, on the one hand, the company has gradually shifted its investment focus to the related diversified fields of fine chemicals and new materials, forming three major industrial clusters of polyurethane, petrochemical, fine chemicals and new materials, which are highly integrated in the current industrial chain and highly integrated in production, but with different industry cycles. On the other hand, we should strengthen the global distribution to meet the challenges of trade protectionism. However, Tiantian Chemical Network analysts believe that the domestic economy will face greater pressure in the future, and the domestic aggregated MDI market will also face greater pressure. At the same time, after experiencing several low prices in half a year, there is a general high level of inventory downstream, so we need to pay close attention to the consumption of social inventory. Therefore, the aggregated MDI market in the second half of the year will focus on sorting out operation and consuming social inventory in the short term.