Group 1 - The chemical sector experienced a decline on November 24, with the chemical ETF (516020) showing a drop of 0.9% by the end of the trading day, after hitting a low of over 2% during the session [1] - Key stocks in the lithium battery, phosphate, and fluorine chemical sectors saw significant declines, with Enjie Co. down 5.83% and Hongda Co. down 4.34%, among others [1][3] - Despite the recent pullback in popular sectors like lithium batteries, institutions remain optimistic about the long-term trends in these sectors, with expectations of improved supply-demand dynamics by 2026 [1][3] Group 2 - The chemical ETF (516020) has shown a year-to-date increase of 23.73%, outperforming major indices such as the Shanghai Composite Index (14.47%) and the CSI 300 Index (13.04%) [3][4] - Recent trading data indicates that the chemical ETF has seen net subscriptions in 7 out of the last 10 trading days, with a total net subscription amount exceeding 500 million [5] - As of November 21, the price-to-book ratio of the chemical ETF's underlying index was 2.28, indicating a relatively low valuation compared to the past decade [6] Group 3 - Analysts suggest that the chemical industry is poised for further optimization in supply-demand dynamics, with leading companies expected to gain market share due to better management and energy control [7] - The chemical ETF (516020) tracks the CSI Sub-Industry Chemical Index, covering various sub-sectors, with nearly 50% of its holdings in large-cap leading stocks [7] - The report emphasizes the potential for investment opportunities in high-quality supply chain companies with strong cost control and technological differentiation [1][7]

Core Viewpoint - The chemical sector is experiencing an upward trend, with the chemical ETF (516020) showing a gain of 0.55% as of the latest update, driven by strong performances in specific sub-sectors such as explosives, potassium fertilizers, and lithium batteries [1][2]. Market Performance - The chemical ETF (516020) opened at a price of 0.732, fluctuating throughout the day and reaching a peak of 0.734, with a trading volume of 4522 [2]. - Key stocks contributing to the rise include Guangdong Hongda and Yaqi International, both up over 3%, and other stocks like Cangge Mining and Hangyang Co., which saw increases of over 2% and 1% respectively [1]. Industry Insights - Longjiang Securities highlighted that an important meeting from October 20 to 23 in Beijing is focused on formulating the "14th Five-Year Plan," with a potential emphasis on "anti-involution," which could catalyze supply-side reforms in the chemical industry [1]. - The report suggests that certain sub-industries, including polyester filament, organic silicon, and acetic acid, may see accelerated reversals due to strong terminal demand growth and the end of capacity expansion [1]. Valuation Perspective - As of October 17, the chemical ETF (516020) had a price-to-book ratio of 2.22, indicating a low valuation at the 35.62 percentile over the past decade, suggesting attractive long-term investment opportunities [3]. Future Outlook - Zhongtai Securities anticipates that China's chemical industry will enter a new cycle driven by increasing global market share and supportive policies on energy conservation and environmental protection [4]. - Donghai Securities noted that supply-side reforms are likely to lead to structural optimization, with a focus on resilient and advantageous product segments [4]. - The chemical ETF (516020) is positioned to provide efficient exposure to the chemical sector, with nearly 50% of its holdings in large-cap stocks like Wanhua Chemical and Salt Lake Co., while also diversifying into other segments such as phosphate and nitrogen fertilizers [5].

Investment Rating - The report maintains an "Outperform" rating for the basic chemical industry [2] Core Viewpoints - The basic chemical sector has outperformed the market, with the industry index showing a year-to-date increase of 5.8%, surpassing the Shanghai Composite Index by 5.1 percentage points [6][17] - The report highlights significant price increases in key raw materials such as H-acid and active dyes, driven by environmental pressures and supply constraints [28][30] - The report suggests that the industry is entering a new long-term growth cycle, supported by government policies aimed at improving supply-demand dynamics [14] Market Performance - The basic chemical industry index remained flat week-on-week, ranking 14th among 31 sectors [17] - Year-to-date performance shows the basic chemical index up by 5.8%, outperforming both the Shanghai Composite and ChiNext indices [17][23] Key Events - H-acid prices reached 41,750 CNY/ton, marking a month-on-month increase of 3.09% and a year-on-year increase of 22.79% [28] - Active dye prices also increased, with a month-on-month rise of 4.55% [28] Product Price Changes - The report notes significant price increases in various chemical products, with HVO and SAF prices rising by 11.47% and 11.60% respectively [30] - The report identifies a positive feedback loop in the biodiesel supply chain, driven by rising raw material prices [30] Investment Recommendations - The report recommends focusing on companies with strong pricing power in the active dye and biodiesel sectors, including Jinji Co., Jihua Group, and Runtao Co. [29][30] - It also suggests that core assets in the chemical sector are entering a long-term value zone, with companies like Baofeng Energy and Wanhua Chemical highlighted for potential investment [15]

Investment Rating - The industry investment rating is "Outperform the Market" (maintained) [2] Core Viewpoints - The H-acid market is experiencing significant price increases, with a current price of 41,750 RMB/ton, reflecting a month-on-month increase of 3.09% and a year-on-year increase of 22.79%, marking a three-year high [4][6] - The active dye market price is currently 23 RMB/kg, with a month-on-month increase of 4.55% and a year-on-year increase of 9.52% [4][6] - The H-acid industry faces long-term supply-demand gaps due to environmental pressures, leading to the elimination of many small producers and a gradual increase in industry concentration [6] Summary by Sections Market Performance - The report indicates a market performance trend with a range from -22% to +22% for the period from June 2024 to February 2025 [3] Industry Dynamics - H-acid is a key intermediate for producing over 90 types of dyes, which are essential for dyeing wool and cotton fabrics, as well as for pharmaceutical production [6] - The production of H-acid generates complex and toxic wastewater, leading to high treatment costs and significant environmental pressures [6] - As of May 2025, the effective domestic production capacity of H-acid is less than 60,000 tons, indicating a supply gap of over 10% [6] Price Trends - The price of H-acid has been rising, which supports the upward price trend of active dyes, as H-acid constitutes 30-50% of the production cost of active dyes [6] - The active dye industry in China has a high concentration, with a CR4 of 64.91%, suggesting that leading companies have a strong pricing power [6] Recommended Stocks - The report suggests focusing on the following companies: Jinchicken Co., Jihua Group, Runtu Co., Haisheng Pharmaceutical, and Zhejiang Longsheng [6]