Core Viewpoint - The report highlights the current trends in the chemical industry, focusing on price movements, supply-demand dynamics, and investment opportunities in undervalued leading companies amid a backdrop of strong downstream demand and geopolitical tensions [1][3][7]. Industry Dynamics - In the week of January 12-18, 49 out of 100 tracked chemical products saw price increases, while 20 experienced declines, and 31 remained stable. The average price of 49% of products rose month-on-month, while 39% fell [2]. - The average price of WTI crude oil futures increased by 0.54% to $59.44 per barrel, and Brent crude oil futures rose by 0.66% to $63.76 per barrel during the same week [3]. - As of January 9, U.S. crude oil production averaged 13.753 million barrels per day, a decrease of 58,000 barrels from the previous week but an increase of 2.72 million barrels compared to the same period last year [3]. Price Movements - The price of butadiene rose to 9,663 yuan per ton, up 4.04% week-on-week and 25.98% month-on-month, although it is down 20.8% year-on-year [4]. - Epoxy propane prices increased to 8,620 yuan per ton, reflecting an 8.84% rise week-on-week and a 9.88% increase year-on-year [5][6]. Investment Recommendations - As of January 18, the price-to-earnings (P/E) ratio for the basic chemical sector is 14.68, while the oil and petrochemical sector stands at 13.44, indicating potential investment opportunities in undervalued leading companies [7]. - The report suggests focusing on sectors benefiting from strong downstream demand, including electronic materials and certain new energy materials companies, as well as companies that are well-positioned amid supply-side reforms [7]. - Recommended stocks include Wanhua Chemical, Hualu Hengsheng, and others, with a focus on companies in emerging fields such as semiconductor materials and OLED materials [7][8].

Core Viewpoint - The article emphasizes the ongoing integration of artificial intelligence (AI) in various industries, particularly in manufacturing and pharmaceuticals, driven by government policies and technological advancements [4][5][6]. Group 1: AI Integration in Manufacturing - The Chinese government has issued policies to promote the integration of AI in manufacturing, focusing on quality improvement and efficiency through technologies like large models and digital twins [4]. - Key players in the chemical industry, such as China National Petroleum, China Petroleum & Chemical, and China National Offshore Oil Corporation, are developing industry-specific AI models to enhance core business operations [5]. - Companies like Wanhua Chemical are leveraging third-party AI platforms to achieve cost reduction and efficiency in production management and material research [5]. Group 2: Growth of Small Nucleic Acid Drugs - The global market for small nucleic acid drugs has seen significant growth, with a compound annual growth rate (CAGR) of 217.8%, increasing from $0.1 billion in 2016 to $3.25 billion in 2021 [6]. - Projections indicate that the market for oligonucleotide drugs will exceed $15 billion by 2026, with a CAGR of 35% from 2020 to 2025 [6]. - The industry is expected to transition from technological breakthroughs to large-scale commercialization, indicating a promising future for the small nucleic acid drug sector [6]. Group 3: Key Players in Small Nucleic Acid Development - Bluestar Technology has established a comprehensive technology platform for small nucleic acids and peptide drugs, being one of only two global suppliers capable of providing integrated solutions for complex oligonucleotide synthesis [7]. - Lonza Technology is expanding its CDMO services globally, achieving significant progress in partnerships with leading pharmaceutical companies and enhancing its domestic collaborations [7].

Group 1 - The core viewpoint of the article highlights the recovery of Wanhua Chemical's MDI production capacity, which is crucial for supplying raw materials to downstream industries such as home appliances, construction, and automotive during the upcoming production peak season [2] - Wanhua Chemical currently has an MDI production capacity of 3.8 million tons per year and TDI capacity of 1.11 million tons per year, maintaining its leading position in the industry. After the completion of the Fujian base expansion project in 2026, the total MDI capacity will reach 4.5 million tons [3] - The successful resumption of a 1 million tons/year ethylene unit after a 7-month upgrade marks a significant transition from traditional propane cracking to ethane cracking, enhancing the flexibility of raw material sourcing [3][4] Group 2 - The domestic ethylene industry is accelerating its transition towards lighter and more diversified raw materials, with policies encouraging the exploration of ethane and propane cracking processes to optimize raw material structures and enhance competitiveness [4] - The newly implemented dual-feed flexible feeding system allows the upgraded unit to switch between ethane and propane based on market conditions, effectively mitigating supply chain risks associated with reliance on a single raw material [4]

Report Industry Investment Rating No information provided on the report industry investment rating. Core View of the Report The short - term market may experience wide - range fluctuations, but the medium - term upward logic of stock index remains unchanged. After a sharp rise, the short - term market may have large - scale fluctuations. Heavy - position profit - takers are advised to reduce positions on last Tuesday and Wednesday, then cover positions on dips or conduct intraday short - term trading. The spring market long - position window has opened, and the market will maintain an oscillating upward pattern. The mid - term view of being bullish on the stock index remains unchanged under the continuous increase of margin trading funds and the stabilization of the third - quarter report performance [16]. Summary by Directory 1. Weekly View and Strategy - **Fundamental View**: Last week, the market rose first and then fell. The performance of the four major indexes was different, with small and medium - cap indexes rising and large - cap indexes falling. The growth and cyclical style indexes continued to rise, while the financial, consumer, and stable style indexes declined. In the Shenwan industry, TMT and cyclical sectors such as computer, electronics, non - ferrous metals, and media led the rise, while sectors such as military industry, real estate, agriculture, and coal led the decline. In December 2025, the manufacturing PMI was 50.1%, up 0.9 percentage points from the previous month; the non - manufacturing PMI was 50.2%, up 0.7 percentage points from the previous month. The supply and demand sides of the manufacturing PMI continued to recover. The A - share performance showed signs of stabilization in the first quarter, declined in the second quarter, and continued to stabilize and recover in the third quarter [7][10]. - **Strategy View and Outlook**: The short - term market may experience wide - range fluctuations, but the medium - term upward logic of the stock index remains unchanged. It is recommended that heavy - position profit - takers reduce positions and then cover positions on dips or conduct intraday short - term trading. The spring market long - position window has opened, and the market will maintain an oscillating upward pattern. The mid - term view of being bullish on the stock index remains unchanged. In operation, long - term mid - line positions can be held, and short - term long positions should set stop - profit levels. Call options can be held with short - term stop - profit levels set [16]. 2. Index Industry Trend Review - Last week, the market rose first and then fell. The performance of the four major indexes was different, with small and medium - cap indexes rising and large - cap indexes falling. The growth and cyclical style indexes continued to rise, while the financial, consumer, and stable style indexes declined. In the Shenwan industry, TMT and cyclical sectors such as computer, electronics, non - ferrous metals, and media led the rise, while sectors such as military industry, real estate, agriculture, and coal led the decline [22][25]. 3. Main Contract and Basis Trend - Among the four major indexes, IC and IM continued to rise, while IH and IF adjusted. In terms of basis, the quarterly main contract basis of IM returned to a reasonable level. In terms of arbitrage among main contracts, IC/IF and IC/IH oscillated upwards, IH/IF oscillated, IM/IF and IM/IH oscillated upwards, and IM/IC continued to decline [32][36]. 4. Policy and Economy - **Economic Data**: In December 2025, the manufacturing PMI was 50.1%, up 0.9 percentage points from the previous month; the non - manufacturing PMI was 50.2%, up 0.7 percentage points from the previous month. The supply and demand sides of the manufacturing PMI continued to recover. PPI has shown different trends since 2023. In November 2025, industrial enterprise revenue continued to decline to 1.6%, and inventory continued to rise to 4.6%. The growth rate of medium - and long - term credit has been falling since May 2023, reaching 5.89% in November 2025 [42][45][53]. - **Policy**: The Politburo set the tone for the real estate market to stop falling and stabilize and boost the capital market. The State Council issued the New Nine - Point Plan to strengthen investor returns. The central bank created two new monetary policy tools. The implementation plan for promoting the entry of medium - and long - term funds into the market was officially released, which is expected to add 800 billion yuan of long - term funds to the A - share market annually [10]. 5. Revenue and Net Profit of Each Index - The performance of A - shares showed signs of stabilization in the first quarter, declined in the second quarter, and continued to stabilize and recover in the third quarter. In the third quarter of 2025, the performance of the four major indexes rebounded again [79][83]. 6. Valuation - The Shanghai Composite Index's valuation is 17.0155, with an upper - limit value of 15.68, at the 92.32 percentile since 2010, indicating a high valuation. The ChiNext's valuation is relatively low [94]. 7. Fed Interest Rate No information provided on the Fed interest rate. 8. Capital Flows - **Margin Trading**: In 2024, the net inflow was 274.8 billion yuan; in 2025, it was 670 billion yuan; as of January 15, 2026, the net inflow was 177.1 billion yuan, with a large net inflow of 98.1 billion yuan in the first five trading days. - **ETF**: From April 7, 2025, to January 16, 2026, the ETF scale increased by 71.8 billion yuan, 137.1 billion yuan less than the previous week. As of January 16, 2026, the ETF funds had a small net outflow of 138.3 billion yuan. - **Private Securities Investment Funds**: The scale increased by 1.8253 trillion yuan in the first 11 months of 2025, with a significant increase of 1.040028 trillion yuan in October, and the current total scale is 7.0076 trillion yuan. The newly registered scale in the first 11 months of 2025 was 433.7 billion yuan. - **Insurance Funds**: In the third quarter of 2025, the market value of A - shares held by insurance funds increased by 552.4 billion yuan, a month - on - month increase of 18.00%. In the first three quarters of 2025, the market value of A - shares held by insurance funds increased by 1.193 trillion yuan, and after deducting the scale increase, it increased by 758.4 billion yuan. - **Newly Established Funds**: As of September 30, 2025, the newly established stock - type fund shares were 323.3 billion, of which 137 billion were in the third quarter; the newly established hybrid - type fund shares were 103.6 billion, of which 53 billion were in the third quarter. In 2025, index - type funds had a net inflow of 104.9 billion yuan, while active equity - type funds had a net outflow of 444.9 billion yuan, and equity - type funds had a net outflow of 340 billion yuan [13][103][105]. 9. Technical Analysis No information provided on technical analysis other than the historical price charts of the four major indexes.

1. Report Industry Investment Rating - Not provided in the document. 2. Core Views of the Report - The core contradictions affecting the propylene trend include cost support with receding geopolitical sentiment, improved supply - demand situation of downstream PP but still with pressure, and expected supply contraction due to increased PDH maintenance. The propylene 03 contract is expected to fluctuate in the range of 5,800 - 6,200 yuan/ton in the short term [2][3]. - In the near - term, the propylene futures price increase is influenced by cost and supply - demand factors. Overseas propane remains strong, PDH maintenance increases, and the fundamentals of downstream PP improve marginally. In the long - term, there are expectations of propylene capacity expansion, PP over - supply pressure, and cost pressure from increased supply of crude oil and LPG [5][9]. 3. Summary by Relevant Contents 3.1 Core Contradictions and Strategy Recommendations 3.1.1 Core Contradictions - Cost support: Geopolitical disputes after the festival brought risk premiums to crude oil and supported propane prices. Iran exported an average of 960,000 tons of LPG per month in 2025, with about 80% going to China. Although the geopolitical situation cooled down at the end of the week, the impact still remains [2]. - Supply - demand of downstream PP: The PP operating rate this week was 75.62%, slightly down from the previous high of nearly 80%. Spot trading improved marginally, but overall, supply - demand pressure still exists [2]. - Supply contraction: Nationally, the supply - demand gap was still loose, but in the Shandong market, the gap narrowed due to maintenance at Jinneng and Wanhua, leading to a stronger spot price. With continuous PDH losses, more maintenance is expected, and attention should be paid to potential load - reduction of cracking units due to naphtha consumption tax issues [3]. 3.1.2 Trading Strategy Recommendations - **Market positioning**: The market is expected to fluctuate and rise. The price range for PL03 is 5,800 - 6,200 yuan/ton. The unilateral strategy is to buy at low prices, as it is affected by cost and supply - demand. PDH maintenance provides stronger support, but the price may correct with the decline of crude oil risk premiums [15]. - **Basis, calendar spread, and hedging arbitrage strategies**: The basis strategy is to expect the spread to widen. The spot price is strengthening due to supply - demand gap contraction, while the futures price may correct with the decline of geopolitical risks. For the PP - PL spread and PL/PG ratio, it is recommended to wait and see [16][17]. 3.1.3 Industrial Customer Operation Suggestions - For inventory management, if the finished product inventory is high, enterprises can short - sell propylene futures at high prices to lock in profits and sell call options to reduce costs. For procurement management, if the inventory is low, enterprises can buy propylene futures at low prices to lock in procurement costs and sell put options to reduce costs [18]. 3.2 This Week's Important Information and Next Week's Events to Watch 3.2.1 This Week's Important Information - **Positive information**: Tensions in Iran and low PG shipments from the Middle East supported CP prices. Poor PDH profits led to increased maintenance of PDH units this week [19]. - **Negative information**: The long - term trading theme in the crude oil market may be oversupply, and the suspension of US military action against Iran led to a decline in risk premiums [20]. 3.2.2 Next Week's Events to Watch - January 19: China's Q4 GDP; January 20: China's LPR; January 22: US PCE index [21]. 3.3 Futures Market Interpretation 3.3.1 Price, Volume, and Fund Analysis - The PL03 contract fluctuated and rose this week. The net positions of major profitable seats increased, with no significant changes in the top 5 long and short positions in the dragon - tiger list. Foreign investors slightly reduced their net long positions, and retail investors slightly increased their net long positions. Technically, it shows an upward trend but may face short - term correction pressure [23]. 3.3.2 Basis and Calendar Spread Structure - The propylene 03 basis was 95 yuan/ton this week, with the spot price rising steadily and the futures price fluctuating. The 02 - 03 calendar spread was - 97 yuan/ton, compared with - 7 yuan/ton last week. The 03 contract had a larger increase, and the calendar spread showed a reverse arbitrage trend [26]. 3.4 Valuation and Profit Analysis 3.4.1 Upstream Profits - The gross profit of major refineries this week was 762 yuan/ton (+85), and the gross profit of Shandong local refineries was 280 yuan/ton (-89). The cracking end declined slightly, and Fujian Refining had a short - term shutdown [28]. 3.4.2 Mid - stream Profits - Propane cracking profit fluctuated at a low level, and LPG cracking was less economical than naphtha. The PDH profit based on FEI was 88 yuan/ton, and the PDH profit based on CP was - 218 yuan/ton [30]. 3.4.3 Downstream Profits - The spread between PP raffia and propylene was 305 yuan/ton, and the spread between PP powder and propylene was 285 yuan/ton, both slightly narrowing. Epoxy propane chlorohydrin method profit was 323 yuan/ton. Acrylonitrile had a large loss of - 2,362 yuan/ton. Acrylic acid profit was - 415 yuan/ton, and its profit was weakening. Butanol and octanol had profits, while phenol - acetone had a loss of - 1,026 yuan/ton [33]. 3.4.4 Import and Export Profits - The Sino - Korean propylene spread remained stable recently, with CFR China at 785 US dollars (+35) [46]. 3.5 Supply - Demand and Inventory Forecast 3.5.1 Shandong Market Supply - Demand Balance Sheet Forecast - In the Shandong market this week, supply decreased and demand increased. The supply - demand gap narrowed due to maintenance at Jinneng and Wanhua [50]. 3.5.2 Market Supply and Forecast - Due to maintenance of some units this week, propylene production was 1.2315 million tons (-10,500 tons), and the operating rate was 75.23% (-0.72%). PDH, MTO, and steam cracking units all had maintenance situations [53]. 3.5.3 Demand and Forecast - **PP**: The spread between PP pellets/powder and propylene slightly rebounded, and the pellet operating rate slightly decreased. Some PP units had maintenance or production - switching, and the operating rate continued to decline, but the spread has returned to the normal range [65][70]. - **Epoxy propane**: The overall load of epoxy propane slightly decreased but remained at a high level, with some enterprises having short - term shutdowns or load - reduction [71]. - **Acrylonitrile**: There were no significant changes this week [73]. - **Butanol and octanol**: The butanol operating rate increased by 4% due to increased loads at some enterprises. The 450,000 - ton unit of Bohua Yongli is expected to start trial production in February, and Shandong Jianlan is operating normally with a 70,000 - ton unit at a low load [79][81]. - **Acrylic acid**: The acrylic acid capacity utilization rate decreased but remained at a high level, and there was a divergence between production and profit [82]. - **Phenol - acetone**: Some enterprises increased their loads, while Wanhua decreased its load [84]. - **Shandong regional demand**: Demand in the Shandong region increased this week, mainly due to the resumption and increased loads of PP, PO, acrylonitrile, and octanol [85].

Investment Rating - The report rates the chemical industry as "Outperform" [2] Core Views - The report highlights the recent slight increase in international oil prices and the rise in prices of butadiene and propylene oxide, suggesting a focus on undervalued leading companies in the industry and the impact of "anti-involution" on supply in related sub-industries [2][9] - It emphasizes the strong downstream demand and the increasing importance of self-sufficiency in electronic materials and certain new energy materials companies amid a backdrop of price increases [2][9] - The report recommends a mid-to-long-term investment strategy focusing on policy support for demand recovery, continuous supply-side optimization, and the growth potential of emerging sectors such as semiconductor materials, OLED materials, and new energy materials [2][9] Industry Dynamics - As of January 18, the TTM price-to-earnings ratio for the SW basic chemical sector is 14.68, at the 59.64 percentile historically, while the price-to-book ratio is 1.54, at the 40.20 percentile historically [2][13] - The SW oil and petrochemical sector has a TTM price-to-earnings ratio of 13.44, at the 39.81 percentile historically, and a price-to-book ratio of 1.30, at the 41.38 percentile historically [2][13] - The report notes that since 2025, the industry has been significantly affected by tariff-related policies and fluctuations in oil prices [2][13] Price Trends - In the week of January 12-18, 49 out of 100 tracked chemical products saw price increases, while 20 experienced declines, and 31 remained stable [9][32] - The average price of butadiene increased to 9,663 CNY/ton, up 4.04% week-on-week and 25.98% month-on-month [34] - The average price of propylene oxide rose to 8,620 CNY/ton, up 8.84% week-on-week and 9.88% year-on-year [35] Recommendations - The report recommends investing in leading companies such as Wanhua Chemical, Hualu Hengsheng, and Yake Technology, among others, while suggesting to pay attention to companies like Yangnong Chemical and Tongcheng New Materials [2][13]

Investment Rating - The report maintains a "Recommended" rating for the new materials industry [1] Core Insights - The new materials sector is positioned as a crucial direction for the chemical industry, currently experiencing rapid growth in downstream demand. With policy support and technological breakthroughs, domestic new materials are expected to accelerate into a long-term growth phase. The report emphasizes that "one generation of materials leads to one generation of industry," highlighting the foundational nature of the new materials industry as the material basis for other sectors [3][4]. Summary by Sections 1. Electronic Information Sector - Focus areas include semiconductor materials, display materials, and 5G materials. Samsung Display has officially launched mass production of the 8.6 generation OLED panels, which will be used in new laptops this year [5][20]. 2. Aerospace Sector - Key materials of interest are PI films, precision ceramics, and carbon fibers. The successful suborbital flight test of the Lihong No. 1 vehicle demonstrates advancements in low-cost and flexible launch capabilities [7]. 3. New Energy Sector - Focus on photovoltaic materials, lithium-ion batteries, proton exchange membranes, and hydrogen storage materials. India is projected to become the second-largest solar market globally by 2026, driven by steady installation growth [9]. 4. Biotechnology Sector - Key areas include synthetic biology and scientific services. A team from Tsinghua University in Shenzhen has developed a 3D-printed "mini heart" that mimics the rhythmic beating of a real heart, with future applications in organ printing anticipated [11]. 5. Energy Conservation and Environmental Protection Sector - Focus on adsorbent resins, membrane materials, and biodegradable plastics. The Ministry of Industry and Information Technology has launched an action plan to promote high-quality development of industrial internet platforms, aiming for over 450 influential platforms by 2028 [13]. 6. Key Companies and Earnings Forecast - The report highlights several companies with their respective stock prices and earnings per share (EPS) forecasts for 2024A, 2025E, and 2026E, along with their price-to-earnings (PE) ratios and investment ratings. Notable companies include: - Ruihua Tai (688323.SH): EPS forecast of 0.26 for 2026E, rated as "Increase" [14] - Guangwei Composite (300699.SZ): EPS forecast of 0.97 for 2026E, rated as "Buy" [14] - Zhongfu Shenying (688295.SH): EPS forecast of 0.23 for 2026E, rated as "Buy" [14] - Wanrun Co., Ltd. (002643.SZ): EPS forecast of 0.53 for 2026E, rated as "Buy" [14] - Dinglong Co., Ltd. (300054.SZ): EPS forecast of 0.96 for 2026E, rated as "Buy" [14]

Report Industry Investment Rating - Not provided in the content Core Viewpoints - Weak pure benzene, strong styrene, with a high price difference maintained. In the short term, styrene exports continue to exceed expectations, and the downstream replenishment cycle has started, leading to a rapid market rebound. The market will mainly fluctuate at a high level in the short term. Due to continuous maintenance of overseas styrene plants in the first quarter, export negotiations continue, bringing marginal benefits to the market. Domestic shut - down styrene plants have no short - term restart plans, and new supply is limited. The resilience of the downstream 3S products exceeds expectations. After the styrene price increase, continuous buying has led to a short - term positive feedback loop in the market. This round of rebound is driven by styrene, pulling up the price of pure benzene. Currently, pure benzene still has significant physical pressure, but the long - term outlook is gradually improving. Attention should be paid to the opportunity of short - term price reduction after the reduction of pure benzene imports is realized [3][67]. Summaries by Related Catalogs Supply - **Pure benzene domestic production**: In December, 110,000 tons of capacity was under maintenance, and the maintenance volume remained at 110,000 tons in January (assuming a reduction of 45,000 tons due to the maintenance of Zhejiang Petrochemical). Major plants with large - scale maintenance include Sinochem Quanzhou, LIDONG, and Zhejiang Petrochemical. Some Shandong local refineries will increase their operating loads after solving the quota problem to make up for part of the production loss. In January, attention should be paid to the increase in pure benzene production from the new Basf Zhanjiang plant [3][67]. - **Pure benzene imports**: Although the overseas inventory pressure is still high, the overall import volume has decreased. The average monthly import volume of pure benzene from January to March 2026 is about 430,000 tons. The US - South Korea tariff still exists, but the US - Asia aromatics logistics may continue after the Spring Festival, which is estimated to affect 30,000 - 40,000 tons of pure benzene per month [3][67]. Demand - **Styrene**: In December, 85,000 tons of capacity was under maintenance, and 65,000 tons in January. After December, the plant operation gradually recovered. Attention should be paid to the increase in production from the start - up of Shandong Guoen Chemical's plant [3][67]. - **Caprolactam**: Negative feedback from CPL has begun, and factories are gradually reducing their loads. In December, 40,000 tons of capacity was expected to be under maintenance, and 60,000 tons in January, mainly at Fujian Yongrong, Tianchen, Hualu Hengsheng, and Xuyang Cangzhou. In December, attention should be paid to the commissioning of the Hengyi Qinzhou project, and in January, the expansion of Shaanxi Yangmei. Attention should also be paid to whether the recent profit recovery of caprolactam will lead to early restart of the plants [3][67]. - **Phenol**: The operation rate is gradually rising. In December, 30,000 tons of capacity was under maintenance, and 10,000 tons in January. The commissioning of the new Shandong Ruilin plant may be postponed [3][67]. - **Aniline**: In December, 70,000 tons of capacity was under maintenance, mainly at Ningbo Wanhua, Shanghai Covestro, and Chongqing Basf, with a maintenance loss of 77,000 tons. Some plants have extended their maintenance plans, and the operation in January may be lower than expected [3][67]. - **Styrene downstream 3S products**: The demand for styrene downstream 3S products exceeded expectations. Previously, it was thought that downstream factories had high inventory pressure and limited restocking ability. However, after the rapid market rise last week, downstream factories entered the restocking cycle. Currently, home appliance manufacturers are preparing for a good start after the Spring Festival, stimulating the restocking process in the industrial chain. Attention should be paid to the sustainability of the price increase of 3S products [3][67]. Valuation - **Absolute price valuation**: Based on the crude oil price of $60 per barrel, the reasonable valuation of the BZ2603 contract is 5300 - 5500 yuan/ton [3][67]. - **EB processing fee**: The profit will expand in the short term [3][67]. Strategy - **Unilateral trading**: Pay attention to the opportunity of short - selling BZ on rallies [3][67]. - **Inter - delivery spread trading**: Pay attention to the reverse spread of EB02 - 03 [3][67]. - **Inter - commodity spread trading**: Take short - term profit on the PX - BZ spread [3][67].

Investment Rating - The industry investment rating is "Positive" and maintained [8] Core Insights - In the previous two cyclical bull markets, alpha leading stocks significantly outperformed the basic chemical sector. These leaders possess both supply-demand improvements and cost advantages, leading to price elasticity and sustainable low-cost expansion. In cyclical bull markets, they exhibit performance drivers of volume and price increases, providing excess returns for investors [2][6][38]. - The report emphasizes the importance of investing in high-quality leading companies such as Wanhua Chemical, Hualu Hengsheng, Longbai Group, Yangnong Chemical, Huafeng Chemical, and Boyuan Chemical [2][6][38]. Summary by Sections Introduction: Why Focus on Leading Stocks in Cyclical Bull Markets? - The PPI (Producer Price Index) has shown a continuous narrowing of decline and is expected to turn positive by October 2025. This indicates a potential recovery in industrial product pricing and an improvement in market demand and supply conditions. The chemical industry, as a key industrial raw material, is likely to reflect these changes first, suggesting a transition from demand stagnation to a new round of inventory replenishment or capacity adjustment [4][14]. Performance of Alpha Leaders in Previous Cyclical Bull Markets - The report analyzes the stock selection and performance of alpha leaders during the last two cyclical bull markets (2016-2018 and 2020-2021). The selected stocks include Wanhua Chemical, Hualu Hengsheng, Longbai Group, and Yangnong Chemical, with the addition of Huafeng Chemical and Boyuan Chemical in the second round. The performance data shows that these leaders significantly outperformed the basic chemical index [5][18]. - In the first cycle (2016-2018), the highest stock price increases for these leaders were 488.9% for Wanhua Chemical, 281.4% for Hualu Hengsheng, 147.7% for Longbai Group, and 247.5% for Yangnong Chemical, with an average increase of 291.4%. The basic chemical index saw a maximum increase of around 39% during the same period [18][19]. - In the second cycle (2020-2021), the highest increases were 311.0% for Wanhua Chemical, 276.5% for Hualu Hengsheng, 314.2% for Longbai Group, 188.0% for Yangnong Chemical, 290.1% for Huafeng Chemical, and 728.7% for Boyuan Chemical, with an average increase of 351.4% compared to a maximum of 136% for the basic chemical index [18][19]. Investment Recommendations - The report suggests focusing on high-quality leading companies for investment opportunities, as they are expected to benefit from supply-demand improvements and cost advantages. The overall chemical sector is currently at a low point, but with anticipated global economic growth, demand for chemical products is expected to increase. The report also highlights the potential for a recovery in PPI and chemical prices in 2026 [6][38][39].

1. Report Investment Rating - No investment rating information is provided in the report. 2. Core Viewpoints - The synthetic rubber market is expected to remain in a high - level volatile range in the short term. The price is supported by cost, and the downside space is limited [2][4][5]. - The upward trend of butadiene prices is expected to slow down. Although the short - term absolute price is relatively low, which stimulates downstream replenishment and the prices in Asia and Europe are relatively strong, the spot market trading is weakening [6]. 3. Summary by Directory 3.1 Synthetic Rubber 3.1.1 Supply - During the cycle, the high - cis butadiene rubber plants of Maoming Petrochemical and Dushanzi Petrochemical continued to shut down, while the load of some butadiene rubber plants increased. The production capacity utilization rate remained at an absolute high level. The production of high - cis butadiene rubber in this cycle was 32,000 tons, a week - on - week increase of 0.68% [5]. - The domestic butadiene rubber plants are expected to have limited changes in the next cycle [5]. 3.1.2 Demand - In terms of rigid demand, the output of tire enterprises increased week - on - week as the production of overhauled enterprises stabilized. The capacity utilization rate of semi - steel tire sample enterprises increased due to increased foreign trade orders, while the capacity utilization rate of all - steel tire enterprises was restricted by inventory control [5]. - In terms of substitution demand, the price difference between NR - BR main contracts is gradually narrowing, and the substitution demand remains high, so the overall demand of butadiene rubber maintains a high year - on - year growth rate [5]. 3.1.3 Inventory - As of January 14, 2026, the domestic butadiene rubber inventory was 34,900 tons, a week - on - week increase of 5.50%. Both sample production enterprises' inventory and sample trading enterprises' inventory increased to varying degrees [5]. 3.1.4 Valuation - The current static valuation range of butadiene rubber futures fundamentals is 11,600 - 12,100 yuan/ton. The valuation logic has shifted from cost - side support to NR - BR price difference support [5]. 3.1.5 Strategy - Unilateral trading: The price will fluctuate at a high level, with the upper pressure at 12,000 - 12,100 yuan/ton (dynamically rising following the spot price of butadiene rubber), and the lower support at 11,500 - 11,600 yuan/ton (supported by NR - BR price difference and butadiene cost) [5]. - Cross - variety trading: The price difference between NR - BR is gradually narrowing [5]. 3.2 Butadiene 3.2.1 Supply - The estimated weekly production of Chinese butadiene industry sample enterprises in the current cycle (January 9 - 15, 2026) was 110,500 tons, a week - on - week decrease of 2.70%. It is expected to increase slightly to about 113,000 tons next week [6]. - Butadiene production capacity is in a continuous expansion state to match the expansion of downstream industries, and the expansion speed is slightly faster than that of downstream industries in stages [13][15]. 3.2.2 Demand - In the medium term, the operating rates of butadiene rubber and styrene - butadiene rubber remain high, and the demand for butadiene maintains a high year - on - year level. In the short term, the rigid demand for butadiene from synthetic rubber is expected to remain high [8]. - ABS has large inventory pressure, and the demand for butadiene is expected to remain constant with limited incremental demand [8]. - The operating rate of SBS has increased slightly, and the demand for butadiene remains at the rigid demand level with little change [8]. 3.2.3 Inventory - In the current cycle (January 8 - 14, 2026), the domestic butadiene inventory increased slightly, with the total sample inventory increasing by 1.93% week - on - week. The sample enterprise inventory decreased by 6.05% week - on - week, while the sample port inventory increased by 7.99% week - on - week [8]. 3.2.4 Viewpoint - Short - term low absolute prices drive downstream phased replenishment, and the trading situation has improved. Overall, butadiene remains relatively strong in the short term, but the upward trend is expected to slow down due to the weakening of spot market trading [6].