wanhua(600309) 东方证券·2024-08-16 12:38Investment Rating - The report maintains a Buy rating for the company with a target price of 107.09 CNY [2] Core Views - The company, Wanhua Chemical, plans to jointly invest with ADNOC in a 1.6 million tons/year special polyolefin integrated project in Fuzhou, marking a new chapter for both companies [1] - The project leverages ADNOC's domestic investment significance, long-term trust, and Wanhua's efficient chemical industry capabilities, along with green energy resources [1] - The project's profitability is expected to be comparable to Borouge, with gross margins of 48%, 44%, and 37% in 2021-2023 respectively, driven by product differentiation and ethane resource advantages [1] Profit Forecast and Valuation - The company's EPS for 2024-2026 is forecasted to be 5.82, 6.89, and 8.00 CNY respectively [2] - A 15% valuation premium is applied due to the company's superior long-term ROE and historical growth, resulting in a 18x PE multiple for 2024 [2] ADNOC's Strategic Expansion - ADNOC's development aligns with the UAE's national strategy, focusing on sustainable assets to hedge against future declines in oil and gas revenues [13] - ADNOC has been actively expanding its chemical assets, including 5 million tons of polyolefin capacity in Ruwais and a 1 million tons ethane cracker in the US [13][14] - ADNOC's recent capital operations, such as acquiring stakes in OMV and Fertiglobe, indicate a shift towards large-scale industrial investments in China [13][15] Wanhua Chemical's Strategic Shift - The collaboration with ADNOC represents a shift from dominance to partnership for Wanhua, marking a new phase in its international development [21] - The project will utilize Borstar technology from Borealis, with Wanhua providing industrial support and green energy solutions [22] - The project is expected to benefit from low carbon emissions due to the use of green electricity, with a 310MW offshore wind power project already approved [22] Economic Assessment - The project's economic viability is supported by Borstar technology and ethane resource advantages, similar to Borouge's operations [25] - Borouge's product premium contributed 19% and 15% to gross margins in 2022 and 2023 respectively, which is expected to be replicated in the Fuzhou project [26] - Despite higher ethane transportation costs in China, Wanhua's operational efficiency and joint ethane fleet with ADNOC are expected to offset these disadvantages [27][29] Comparative Analysis - Borouge's investment intensity for its ethane cracker projects is significantly higher than that of domestic companies like Satellite Chemical, with single-ton ethylene investment intensity exceeding 2.45 million CNY [20] - Satellite Chemical's Lianyungang project demonstrates that domestic efficiency can offset resource disadvantages, with net margins comparable to Borouge after adjusting for product premiums [29]