Changjiang Securities·2025-07-24 09:43Investment Rating - The report maintains a "Positive" investment rating for the petrochemical industry [13]. Core Insights - The petrochemical industry is experiencing a historical trend of "anti-involution," which is expected to accelerate under current industry conditions. The focus is on high concentration in midstream sectors like refining and ethylene, with attention on policy developments and execution progress. Downstream chemical products are facing profitability pressures, but certain sub-industries with high concentration may benefit from anti-involution policies [4][10]. Summary by Sections Current Focus on "Anti-Involution" in the Petrochemical Industry - The period from October 2022 to June 2025 has seen China's PPI in negative territory for 33 consecutive months, marking a significant historical record. This indicates the formation of "involution negative feedback." Industrial capacity utilization has declined from 78.4% in Q2 2021 to 74% in Q2 2025, approaching the 2016 low of 73.8%. The profitability of industrial enterprises is also declining, with profit margins dropping to 5.39% in 2024, the lowest since 2003. Administrative intervention is needed to promote rebalancing [7][22][20]. Opportunities and Challenges in the Petrochemical Industry - The concept of "anti-involution" has been present in the petrochemical industry for some time. Initial policies aimed at promoting energy conservation and carbon reduction also contain elements of anti-involution. Policies set a production capacity cap of 1 billion tons for the refining industry and implement capacity reduction and replacement policies. The focus is on optimizing the industry structure and layout through control of total capacity, scale, and efficiency indicators [8][32]. Logic of "Anti-Involution" in the Petrochemical Industry - The midstream sector of the petrochemical industry is highly concentrated, primarily among state-owned and private refining enterprises. The report emphasizes the need to monitor the progress of policy-driven capacity clearance for smaller refineries, which may benefit the main refining enterprises. The overall profitability of downstream chemical products is under pressure, but high-concentration companies have a stronger willingness and ability to reduce production [9][42]. Future Policy Tracking and Potential Benefits for the Refining Industry - If the anti-involution policies can effectively eliminate outdated capacity, the industry may gradually optimize supply-side dynamics. This, combined with a slowdown in overseas petrochemical growth, could lead to a new upward cycle for the industry. Key areas of focus include the elimination of outdated refining and chemical capacities, which may benefit related companies [10][11]. Investment Recommendations - The report suggests focusing on the refining sector, highlighting key players such as Sinopec, PetroChina, and Huajin Co., along with private refiners like Hengli Petrochemical and Rongsheng Petrochemical. Additionally, it recommends coal chemical leaders like Baofeng Energy and gasification leaders like Satellite Chemical [11].