Investment Rating - The industry investment rating is "Positive" and maintained [8] Core Insights - In the previous two cyclical bull markets, alpha leading stocks significantly outperformed the basic chemical sector. These leaders possess both supply-demand improvements and cost advantages, leading to price elasticity and sustainable low-cost expansion. In cyclical bull markets, they exhibit performance drivers of volume and price increases, providing excess returns for investors [2][6][38]. - The report emphasizes the importance of investing in high-quality leading companies such as Wanhua Chemical, Hualu Hengsheng, Longbai Group, Yangnong Chemical, Huafeng Chemical, and Boyuan Chemical [2][6][38]. Summary by Sections Introduction: Why Focus on Leading Stocks in Cyclical Bull Markets? - The PPI (Producer Price Index) has shown a continuous narrowing of decline and is expected to turn positive by October 2025. This indicates a potential recovery in industrial product pricing and an improvement in market demand and supply conditions. The chemical industry, as a key industrial raw material, is likely to reflect these changes first, suggesting a transition from demand stagnation to a new round of inventory replenishment or capacity adjustment [4][14]. Performance of Alpha Leaders in Previous Cyclical Bull Markets - The report analyzes the stock selection and performance of alpha leaders during the last two cyclical bull markets (2016-2018 and 2020-2021). The selected stocks include Wanhua Chemical, Hualu Hengsheng, Longbai Group, and Yangnong Chemical, with the addition of Huafeng Chemical and Boyuan Chemical in the second round. The performance data shows that these leaders significantly outperformed the basic chemical index [5][18]. - In the first cycle (2016-2018), the highest stock price increases for these leaders were 488.9% for Wanhua Chemical, 281.4% for Hualu Hengsheng, 147.7% for Longbai Group, and 247.5% for Yangnong Chemical, with an average increase of 291.4%. The basic chemical index saw a maximum increase of around 39% during the same period [18][19]. - In the second cycle (2020-2021), the highest increases were 311.0% for Wanhua Chemical, 276.5% for Hualu Hengsheng, 314.2% for Longbai Group, 188.0% for Yangnong Chemical, 290.1% for Huafeng Chemical, and 728.7% for Boyuan Chemical, with an average increase of 351.4% compared to a maximum of 136% for the basic chemical index [18][19]. Investment Recommendations - The report suggests focusing on high-quality leading companies for investment opportunities, as they are expected to benefit from supply-demand improvements and cost advantages. The overall chemical sector is currently at a low point, but with anticipated global economic growth, demand for chemical products is expected to increase. The report also highlights the potential for a recovery in PPI and chemical prices in 2026 [6][38][39].

Investment Rating - The report maintains an "Accumulate" rating for the industry [1] Core Viewpoints - The supply side of the spandex industry is nearing the end of capacity expansion, and the elimination of outdated capacity is expected to improve industry prosperity [4][9] - The demand for spandex is robust due to its excellent performance and wide application, with a CAGR of 11% in apparent consumption from 2017 to 2024 [4][19] - The competitive landscape shows that China is a major producer of spandex, with a high industry concentration, as indicated by a CR5 of 84% by the end of 2025 [4][22] Supply Side Summary - As of the end of 2025, China's spandex capacity is 1.44 million tons/year, with an industry operating rate of 85% [4] - The industry has been experiencing a continuous oversupply from 2022 to 2025, with an average annual operating rate between 70%-80% [4][24] - Major spandex producers include Huafeng Chemical (400,000 tons/year), Xiaoxing Spandex (246,000 tons/year), and others, indicating a significant head effect in the industry [4][24] Demand Side Summary - Spandex is often referred to as the "MSG of textiles," significantly enhancing the performance and quality of fabrics even in small proportions [4][19] - The demand for spandex is expected to grow rapidly as its application range and blending ratio in textiles expand [4][19] Competitive Landscape Summary - China's spandex production capacity accounts for 79% of the global total, with a production capacity of 1.375 million tons in 2024 [22] - The industry is characterized by fierce competition, with many companies operating at a loss due to low overall operating rates [22][24] Price Review and Outlook Summary - As of January 15, 2026, the price of spandex in China is 23,000 yuan/ton, with a price difference of 10,864 yuan/ton [4][28] - The price of spandex has been under pressure due to oversupply, but the report anticipates a recovery in prices as outdated capacity is eliminated [27][31] Investment Targets Summary - Key investment targets in the spandex industry include Huafeng Chemical, Xinxiang Chemical Fiber, and Taihe New Materials, each with varying capacities and profitability levels [33][47] - Huafeng Chemical is noted for its significant market share and cost advantages, while Xinxiang Chemical Fiber is expanding its capacity despite market fluctuations [47][56]

Core Viewpoint - Huafeng Chemical Co., Ltd. has applied for a patent for a preparation method of sulfonic acid modified polyurethane fibers, indicating a focus on innovation in material science and potential market expansion in the textile industry [1] Group 1: Patent Application Details - The patent application is titled "A Preparation Method of Sulfonic Acid Modified Polyurethane Fibers" with publication number CN121295377A and was filed on November 2025 [1] - The preparation method involves a three-step process: prepolymerization and chain extension reaction, ring-opening reaction with sulfonic acid lactone compounds, and final spinning process to produce the fibers [1] Group 2: Technical Advantages - The method introduces sulfonic acid groups after the chain extension reaction, which helps avoid adverse effects on polymer stability that could arise from improper timing of sulfonic acid introduction [1] - The resulting sulfonic acid modified polyurethane fibers exhibit excellent mechanical properties along with good dyeing performance and color fastness [1]

Core Insights - The chemical industry is expected to experience a recovery in profitability in 2026, marking a new starting point for supply-demand rebalancing, driven by anti-involution policies and advancements in new productive forces such as AI and robotics [2][5]. Group 1: Industry Overview - The chemical industry faced a downturn in profitability and valuation in 2025, but signs of stabilization and recovery are anticipated in 2026 [2]. - The peak of capital expenditure in the chemical sector has passed, with fixed asset investment turning negative in the second half of 2025, indicating the end of the capacity expansion cycle [5][14]. - The Producer Price Index (PPI) for chemicals is expected to gradually turn positive in 2026 after a prolonged period of decline [14]. Group 2: Investment Themes - Capital expenditure is decreasing, and leading companies like Wanhua Chemical are expected to see a recovery in profitability as they reduce capital spending and increase their global market share in MDI [5]. - The anti-involution policy is reshaping supply dynamics, with a focus on quality development and the exit of outdated capacities, benefiting companies with innovative capabilities and export advantages [5]. - New materials are driving demand growth in traditional chemicals, with companies like Dinglong Technology and Anji Technology positioned to benefit from domestic substitution in high-end materials [5]. Group 3: Market Dynamics - Chemical prices have been under pressure, with the chemical product price index declining approximately 8.8% in 2025, but stock prices in the sector have rebounded by 33.3% [10][16]. - The operating rates of mainstream chemical products are showing signs of weakness, with inventory levels varying significantly across different products [17][18]. - The supply-demand balance for phosphate rock remains tight, with stable prices for high-grade phosphate rock, while the market for phosphate fertilizers is influenced by policy and demand fluctuations [46][43]. Group 4: Global Trends - The global chemical supply is shifting towards China, which has become the largest chemical producer, while European chemical production faces challenges due to high energy costs [31][33]. - The restructuring of supply chains due to tariff disturbances is prompting companies to adapt, with a focus on overseas expansion for leading chemical firms [26][22]. - The anti-involution policies are expected to enhance industry cash flow and promote sustainable development by curbing disorderly expansion and prioritizing profitability [40].

Investment Rating - The report maintains a "Recommended" rating for the chemical industry [1] Core Insights - The chemical industry is expected to experience an upward cycle due to the implementation of "anti-involution" policies in China and the accelerated exit of some European facilities [29] - The report highlights the potential for domestic substitution of semiconductor materials from Japan due to rising geopolitical tensions, which could benefit various companies in the sector [5] - The chromium salt industry is undergoing a value reassessment driven by increased demand from AI data centers and commercial aircraft engines, with a projected supply-demand gap of 340,900 tons by 2028 [8] Summary by Sections Industry Performance - The chemical industry has shown strong relative performance with a 1-month increase of 10.7%, 3-month increase of 9.6%, and a 12-month increase of 45.1%, outperforming the CSI 300 index [3] Price Trends - Key products such as lithium carbonate and polysilicon have seen significant price increases, supported by policy guidance and industry self-discipline [12] - The price of chromium salts has remained stable, with metal chromium priced at 82,000 CNY/ton as of January 9, 2026 [15] Investment Opportunities - Focus on companies with low-cost expansion capabilities, such as Wanhu Chemical and Hualu Hengsheng, as well as those in sectors with improving market conditions like chromium salts and phosphates [6][9] - High dividend yield opportunities are identified in state-owned enterprises like China Petroleum and China National Chemical [10] Key Company Tracking - Companies such as Dongfang Shenghong and Huabei Yihua are highlighted for their earnings potential, with projected EPS growth for 2026 [30] - The report tracks specific price movements for various chemicals, including a notable increase in the price of ammonium phosphate and a stable price for urea [17][19]

Core Viewpoint - The report highlights the growth trends in China's synthetic fiber industry, indicating a production increase and providing insights into market dynamics from 2026 to 2032 [1] Industry Overview - In November 2025, China's synthetic fiber production reached 6.88 million tons, reflecting a year-on-year growth of 5.7% [1] - From January to November 2025, the cumulative production of synthetic fibers in China was 72.404 million tons, with a cumulative growth rate of 4.9% [1] Companies Mentioned - The report lists several key companies in the synthetic fiber sector, including Hengyi Petrochemical, Rongsheng Petrochemical, Xin Fengming, Tongkun Co., Hengli Petrochemical, Jilin Chemical Fiber, Huafeng Chemical, Aoyang Health, Taihe New Materials, and Jiangnan High Fiber [1] Research and Consulting - The insights are derived from a report by Zhiyan Consulting, a leading industry consulting firm in China, which specializes in providing in-depth industry research reports, business plans, feasibility studies, and customized services [1]

Core Viewpoint - Huafeng Chemical's stock has shown significant growth in recent trading sessions, with a notable increase in both price and trading volume, indicating strong market interest and potential investment opportunities [1][2]. Group 1: Stock Performance - As of January 9, Huafeng Chemical's stock price increased by 2.04%, reaching 11.98 CNY per share, with a trading volume of 311 million CNY and a turnover rate of 0.53%, resulting in a total market capitalization of 59.451 billion CNY [1]. - Year-to-date, the stock price has risen by 8.91%, with a 31.36% increase over the past 20 days and a 37.39% increase over the past 60 days [1]. Group 2: Financial Performance - For the period from January to September 2025, Huafeng Chemical reported a revenue of 18.109 billion CNY, reflecting a year-on-year decrease of 11.11%, while the net profit attributable to shareholders was 1.462 billion CNY, down 27.45% year-on-year [2]. - Cumulatively, the company has distributed 5.124 billion CNY in dividends since its A-share listing, with 2.481 billion CNY distributed over the past three years [3]. Group 3: Shareholder Structure - As of September 30, 2025, the number of shareholders for Huafeng Chemical decreased by 25.68% to 48,400, while the average number of tradable shares per shareholder increased by 34.55% to 102,258 shares [2]. - Among the top ten circulating shareholders, Hong Kong Central Clearing Limited holds 72.5173 million shares, an increase of 3.3948 million shares from the previous period, while the Southern CSI 500 ETF reduced its holdings by 562,700 shares [3].

Group 1 - The chemical fiber sector increased by 0.83% on January 8, with Tongyi Zhong leading the gains [1] - The Shanghai Composite Index closed at 4082.98, down 0.07%, while the Shenzhen Component Index closed at 13959.48, down 0.51% [1] - Key stocks in the chemical fiber sector showed various performance metrics, with Tongyi Zhong closing at 20.86, up 5.41%, and Yufu Co., Ltd. at 6.80, up 3.82% [1] Group 2 - The chemical fiber sector experienced a net outflow of 190 million yuan from main funds, while retail investors saw a net inflow of 112 million yuan [2] - The trading volume and turnover for key stocks varied, with Nanjing Chemical Fiber showing a significant decline of 4.80% [2] - The detailed fund flow for individual stocks indicated that Huafeng Chemical had a main fund outflow of 57.28 million yuan, while Zhongfu Shenying had a net inflow of 54.90 million yuan [3]

Group 1 - The chemical fiber sector experienced a slight increase of 0.11% on January 7, with Jilin Carbon Valley leading the gains [1] - The Shanghai Composite Index closed at 4085.77, up 0.05%, while the Shenzhen Component Index closed at 14030.56, up 0.06% [1] - Notable gainers in the chemical fiber sector included Jilin Qigu, which rose by 5.63% to a closing price of 18.02, and Taihe New Materials, which increased by 4.46% to 11.71 [1] Group 2 - The chemical fiber sector saw a net outflow of 214 million yuan from main funds, while retail funds had a net inflow of 25.27 million yuan [2] - The trading volume for Jilin Qigu was 281,000 shares, with a transaction value of 497 million yuan, indicating strong investor interest [1][2] - The overall market sentiment reflected mixed performances, with some stocks like Sanfangxiang and Haiyang Technology experiencing declines of 6.20% and 4.10%, respectively [2] Group 3 - Main fund inflows were observed in stocks like Xinxiang Chemical Fiber, which had a net inflow of 36.42 million yuan, and Nanjing Chemical Fiber with 16.69 million yuan [3] - Retail investors showed a negative sentiment towards several stocks, with significant outflows from Xinxiang Chemical Fiber and Nanjing Chemical Fiber, indicating potential concerns among smaller investors [3] - The overall trading dynamics suggest a cautious approach among investors, with main funds favoring certain stocks while retail investors exhibited mixed reactions [3]

Summary of Conference Call Records Industry Overview - The basic chemical sector is likely at the bottom of its cycle, with no need to wait for significant improvements in fundamentals before investing. Stock prices often lead the market, indicating potential investment opportunities when future fundamental changes are anticipated [2][4]. Key Investment Opportunities - Investment opportunities in 2026 are concentrated in traditional cyclical industries and technology materials, particularly in AI-related sectors such as energy storage materials (e.g., lithium carbonate) and storage materials (e.g., Yake Technology) [1][6]. - Recommended leading companies in the chemical industry include Wanhua Chemical, Hualu Hengsheng, and Juhua Co., due to their low valuations and high profit elasticity [1][8]. Company-Specific Insights Wanhua Chemical - Strongly recommended as a top investment choice due to its outlier effect and continuous growth catalysts. Expected revenue for 2026 is projected to reach 400 billion yuan, with a net profit forecast of 16 billion yuan [1][12][14]. - The company has a significant profit increase potential with every 1,000 yuan increase in MDI and TDI prices, translating to a net profit increase of 3.4 billion yuan [12][14]. Hualu Hengsheng - The company is expected to achieve annualized quarterly performance exceeding 5 billion yuan in 2026, supported by multi-category layout and technological upgrades [1][17][18]. Dongcai Technology - Notable for its advantages in new energy materials, with expectations to turn losses into profits as the overall profitability in the new energy sector improves [1][13][15]. Baofeng Energy - Expected to maintain stable annual profits between 12 billion to 13 billion yuan following the release of new capacity at its Ningxia base. The company benefits from the cyclical changes in the coal chemical industry and has diversified its product offerings [3][19][20]. Industry Trends and Signals - The potassium fertilizer industry is expected to experience tight supply and demand in 2026, maintaining high prices, while the phosphate market outlook remains stable with manageable supply increases [3][22][23]. - The tire industry is impacted by EU anti-dumping policies, prompting leading companies to expand overseas to increase market share [3][27][28]. - The spandex industry is at a cyclical bottom, with potential supply-side clearing effects anticipated due to the bankruptcy of a major player, which could improve market conditions [3][34][35]. Additional Insights - Investment in underperforming sectors is justified as they have likely reflected most negative factors in their stock prices, presenting potential for positive marginal changes [11]. - The refrigerant industry, while considered an "old story," shows strong certainty and potential for long-term investment due to ongoing price support [24]. - The organic silicon industry is expected to see price increases driven by domestic demand and external supply constraints, with companies like Dongyue showing significant elasticity [25][26]. Conclusion - The conference call highlighted a range of investment opportunities across various sectors within the chemical industry, emphasizing the importance of leading companies and emerging trends. Investors are encouraged to consider both cyclical recovery and technological advancements when making investment decisions.