SINOLINK SECURITIES·2025-07-01 07:26Investment Rating - The report suggests a "Standard Allocation" for the basic chemical sector, indicating a high potential for structural opportunities despite a lower probability of success [4]. Core Insights - The basic chemical sector currently has a high valuation safety margin, with the PB historical percentile dropping below 9% since 2010. When the PB percentile is below 10%, the sector's cost-effectiveness for allocation becomes apparent [4]. - Supply, cost, and demand sides continue to face disturbances, impacting the overall success rate of investments in this sector [4]. Summary by Sections Investment Strategy - Focus on sub-industries with marginal changes, such as pesticides, glyphosate, and sweeteners [4]. - Pay attention to the export chain, particularly lubricating oil additives, tires, and potassium fertilizers [4]. - Look for performance certainty in sectors like refrigerants and civil explosives [4]. Market Dynamics - The chemical industry is experiencing significant internal competition, with "change" being a focal point for attention [6]. - The industry is under pressure from substantial investments, with a compounded growth rate of 14.1% for raw materials and products over the past four years [17]. - The current investment cycle is nearing its end, with potential delays in capacity realization expected over the next 1-2 years [17]. Supply and Demand Trends - The chemical sector's inventory has not shown significant cyclical changes, remaining in a low-level oscillation state [20]. - Despite a slight recovery in chemical consumption due to government stimulus, the real estate sector continues to struggle, impacting overall demand [22][23]. Price Trends - The report highlights various price movements in the chemical sector, with glyphosate prices showing a year-on-year decrease of 10.26% as of May 2025 [36]. - The report also notes the price fluctuations of several chemicals, indicating a complex pricing environment influenced by supply chain disruptions and production capacity [34][35].