Bank of China Securities·2025-12-16 07:16Investment Rating - The report assigns a "Strong Buy" rating for the chemical industry, indicating a positive outlook for investment opportunities [2]. Core Insights - The chemical industry is currently at the bottom of the cycle, with the "anti-involution" trend expected to accelerate the optimization of the competitive landscape, driving an upward trend in industry prosperity. Leading companies are likely to see improvements in both profitability and valuation, with recommendations for companies such as Wanhua Chemical, Hualu Hengsheng, China Petroleum, Baofeng Energy, and New Hope Liuhe [3]. - The report highlights the importance of self-discipline in production cuts within sub-industries like polyester filament, agrochemicals, fluorochemicals, and organosilicon, recommending companies such as Tongkun Co., New Fengming, Lier Chemical, and others [3]. - The refining industry, currently at a cyclical low, is expected to benefit from the elimination of backward production capacity, leading to a rapid recovery in prosperity, with recommendations for China Petroleum, Hengli Petrochemical, and others [3]. Summary by Sections Supply Side - The peak of capacity expansion has passed, with fixed asset investment in the chemical raw materials and chemical products manufacturing industry showing a negative year-on-year growth for the first time in nearly five years as of June 2025. The total fixed assets of listed companies in the basic chemical industry reached 14,628.58 billion yuan, a year-on-year increase of 15.56% [14][46]. - The construction of new projects has also seen a downturn, with the amount of ongoing projects decreasing by 15.11% year-on-year as of Q3 2025 [46]. Demand Side - Domestic demand is expected to be boosted by stimulus policies, while exports of chemical products continue to grow. The demand from downstream industries such as real estate, automotive, and textiles is showing positive trends [3][14]. - The resilience of chemical product exports is highlighted, with the export quantity index for the chemical raw materials and chemical products manufacturing industry reaching 122.40 as of September 2025 [3]. Global Industry Landscape - The report notes a shift in the global industrial landscape, with Chinese chemical companies enhancing their competitiveness. In 2023, China's chemical sales reached 2,238.1 billion euros, accounting for 43.1% of the global market [3][14]. - The report emphasizes the ongoing adjustments in the global chemical industry, with many overseas chemical production capacities exiting the market due to high costs and aging facilities, thereby strengthening the competitive position of domestic companies [3]. Policy and Industry Self-Regulation - The "anti-involution" actions initiated in 2024, including self-regulation and production cuts by industry associations and leading companies, are expected to help restore product prices and profits [3]. - The report discusses various policies aimed at energy conservation and carbon reduction, which are likely to optimize supply and improve product structures in the petrochemical industry [3].