wanhua(SH:600309) Changjiang Securities·2024-06-18 06:01Investment Rating - The investment rating for the company is "Buy" and is maintained [4]. Core Views - The report emphasizes the rapid growth of the petrochemical business segment since 2015, highlighting the competitive advantage of companies that can procure, transport, and process overseas ethane due to the long-term cost advantages of ethane resources in the U.S. [2][4]. - The report outlines the strong core competitive advantages of Wanhua Chemical in its main business areas: polyurethane, fine chemicals, and petrochemicals, with a focus on the integration of ethylene projects and the expected growth in the petrochemical sector [4][11]. Summary by Sections Why Focus on U.S. Ethane Resources? - Wanhua Chemical has established strong competitive advantages in polyurethane, fine chemicals, and petrochemicals, with significant growth in the petrochemical segment since the launch of its PO/AE integration project in 2015 and the full operation of its ethylene phase one project in 2020 [4][11]. Ethane Cracking: Five Advantages Creating a Strong Moat - Ethane cracking has five key advantages: 1. Long-term oversupply of U.S. ethane leads to significantly undervalued prices, providing a clear raw material cost advantage [20]. 2. Companies with early access to pipeline and port resources will enjoy first-mover advantages in ethane cracking, while later entrants face delays due to trade restrictions [21]. 3. Ethane cracking features high ethylene yield, low investment intensity, and short processing flows, resulting in much lower processing costs compared to traditional methods [21][28]. 4. The first-mover advantage in accessing ethane resources creates a barrier for new entrants, reinforcing the competitive position of established players [35]. 5. The negative carbon footprint of ethane cracking aligns with global carbon neutrality goals, enhancing its growth potential [39]. Comprehensive Layout: Wanhua's Petrochemical Alpha Expected to Significantly Enhance - The ethylene phase two project is set to launch soon, and other projects are expected to optimize costs through imported ethane resources. Wanhua's strategic partnerships and investments in large ethane carriers position it favorably for future growth [42][44]. - The report forecasts net profits for Wanhua Chemical of 18.77 billion, 23.58 billion, and 26.68 billion yuan for 2024, 2025, and 2026, respectively, indicating strong growth potential [6].