Donghai Securities·2025-05-28 08:13Investment Rating - The report suggests a positive outlook for the chemical industry, indicating that it is at a critical turning point with potential for recovery in various sub-sectors [15][72]. Core Insights - The chemical industry is experiencing a reduction in overall capacity investment, with a significant drop in capital expenditure ratios from 2.26 to 1.64, indicating a shift towards supply-side reforms [15][19]. - Key sectors showing recovery potential include compound fertilizers, fluorochemicals, membrane materials, and food additives, while potassium fertilizers and coal chemicals are also improving but remain at historically high capacity levels [19][72]. - The report emphasizes the importance of supply-side reforms and suggests that the industry is at a pivotal moment, similar to the reforms seen in 2014-2015 [15][72]. Summary by Sections 1. Research Methodology and Industry Overview - The report utilizes three financial indicators: capital expenditure/depreciation and amortization, ROE (return on equity), and net cash flow from operating activities/revenue to assess the chemical industry's capacity and performance over the past decade [14][15]. - Recent policies emphasize stabilizing prices and reducing ineffective supply, which aligns with the industry's current trends [14]. 2. Key Sub-Sector Analysis - Silicone: Significant reduction in capital expenditure, with cash flow improving rapidly. The sector is expected to enter a new cycle if capacity clearing continues [24][25]. - Membrane Materials: The sector is at a low point in profitability, but leading companies are showing signs of recovery in ROE [28]. - Chlor-alkali: Initial capacity clearing is underway, with profitability beginning to rebound [34]. - Coal Chemicals: Despite high historical capital investment, the sector is seeing a rebound in ROE and cash flow [39]. - Modified Plastics: The sector is experiencing rational capacity investment with improving demand, leading to better profitability [47]. - Fluorochemicals: The refrigerant segment is performing well, but other products face intense competition and require structural adjustments [53]. - Food and Feed Additives: The sector is expected to maintain a positive cycle, benefiting from stable demand in the food and beverage industry [54]. 3. Investment Recommendations - Focus on sectors with significant supply-side reform potential, such as silicone, membrane materials, and chlor-alkali, with specific companies highlighted for investment [75]. - Monitor sectors with relative advantages or leading companies, including coal chemicals and fluorochemicals [75]. - Emphasize demand-driven sectors, particularly food additives and modified plastics, where leading companies are expected to perform well [75].