Investment Rating - The report maintains a "stronger than market" rating for the chemical sector [5]. Core Insights - The merger between AkzoNobel and Sherwin-Williams is expected to create a leading global paint company with annual revenues of $17 billion (approximately 120.9 billion RMB) [3]. - The Ministry of Commerce continues to impose anti-dumping duties on imported propanol from the U.S., with rates ranging from 254.4% to 267.4% [3]. - The domestic tire industry shows strong competitiveness, with scarce growth targets worth attention, including Sailun Tire, Senqilin, General Shares, and Linglong Tire [4]. - The consumer electronics sector is anticipated to gradually recover, benefiting upstream material companies, with recommendations to focus on companies like Dongcai Technology and Stik [4]. - The phosphorous chemical sector is highlighted for its resilience due to supply constraints and increasing demand from the new energy sector, with suggested companies including Yuntianhua and Chuanheng Shares [4]. - The report emphasizes the importance of leading companies in the chemical industry benefiting from economic recovery and demand resurgence, recommending companies like Wanhua Chemical and Hualu Hengsheng [4]. Summary by Sections Market Performance - The Shanghai Composite Index fell by 3.9%, the ChiNext Index by 6.15%, and the CSI 300 by 3.77%, while the CITIC Basic Chemical Index dropped by 8.24% [14]. - The top five performing sub-industries in the chemical sector were rubber additives (1.75%), potassium fertilizer (-1.21%), tires (-2.84%), modified plastics (-4.32%), and membrane materials (-5.19%) [17]. Major Industry Dynamics - The merger between AkzoNobel and Sherwin-Williams is set to create a company with a business scope covering various paint solutions and an expected annual revenue of $17 billion [3]. - The Ministry of Commerce's anti-dumping measures on U.S. propanol will continue, affecting pricing and supply dynamics in the market [3]. Investment Themes - The tire sector is highlighted for its competitive domestic enterprises, with specific companies recommended for investment [4]. - The consumer electronics sector is expected to recover, with upstream material companies poised to benefit [4]. - The phosphorous chemical sector is noted for its tightening supply-demand balance, with several companies recommended for attention [4]. - The report suggests focusing on leading companies in the chemical industry that are likely to benefit from economic recovery and demand resurgence [4].

Core Viewpoint - Zhongyuan Securities maintains a "market perform" investment rating for the basic chemical industry, suggesting investment opportunities in sectors benefiting from supply-side improvements and resource attributes under the backdrop of Federal Reserve interest rate cuts [1] Group 1: Industry Performance - In the first three quarters of 2025, the basic chemical industry achieved total revenue of 19,924.77 billion yuan, a year-on-year increase of 5.69%, and a net profit of 1,170.62 billion yuan, up 7.58% year-on-year, indicating a continued recovery in industry profitability [2] - All 18 sub-industries within the basic chemical sector reported year-on-year revenue and profit growth, with significant differentiation among them, driven by improved supply-demand dynamics and demand recovery [3] Group 2: Profitability Trends - The basic chemical industry's gross margin and net margin have shown signs of recovery since early 2024, with gross margin at 17.69% and net margin at 6.17% in the first three quarters of 2025, both reflecting slight year-on-year increases [4] - Sub-industries such as fluorine chemicals, potash fertilizers, synthetic resins, chlor-alkali, and compound fertilizers have experienced notable improvements in profitability [4] Group 3: Financial Indicators - The basic chemical industry maintains a stable financial position, with a slight decrease in the asset-liability ratio, improved operating cash flow, and a decline in construction projects [5] - Inventory turnover days have increased slightly year-on-year, indicating changes in inventory management [5] Group 4: Regional Performance - Chemical enterprises in Henan province underperformed compared to the overall industry, with revenues of 564.21 billion yuan and 188.98 billion yuan in the first three quarters and third quarter respectively, reflecting declines of 2.21% and 1.03% year-on-year [6] - Net profits for Henan's chemical companies also fell significantly, with a year-on-year decrease of 29.33% and 26.70% for the respective periods [6]

Group 1 - The chemical sector experienced a decline on November 21, with the Chemical ETF (516020) dropping over 4% at one point and closing down 2.84% [1][2] - Key stocks in the sector, such as Enjie Co., Ltd. and Tianqi Lithium, saw significant losses, with Enjie hitting the daily limit down and Tianqi falling over 8% [1][2] - The Chemical ETF has shown a year-to-date increase of 30.5%, outperforming major indices like the Shanghai Composite Index (17.28%) and the CSI 300 Index (16.01%) [1][3] Group 2 - The chemical industry has faced a continuous decline in product prices for four years, but recent policies aimed at reducing competition may signal a turning point [3][4] - The current price-to-book ratio of the Chemical ETF is 2.37, indicating a relatively low valuation compared to the past decade [4] - Analysts suggest that the industry may see improved supply-demand dynamics and profitability due to the "anti-involution" policies, with a focus on sectors like pesticides and organic silicon [5][6] Group 3 - The Chemical ETF (516020) tracks the CSI Sub-Industry Chemical Index, covering various segments of the chemical industry, with nearly 50% of its holdings in large-cap stocks [5][6] - Investors are encouraged to consider the Chemical ETF as a more efficient way to gain exposure to the chemical sector [5][6]

Summary of Key Points from Conference Call Records Industry Overview - The conference call discusses the Chinese market, focusing on various sectors including technology, manufacturing, aviation, oil shipping, chemicals, and consumer goods [1][4][5][6]. Core Insights and Arguments 1. **Market Outlook**: The index is expected to rise to 4,200-4,300 points from December to February, driven by product structure adjustments and increased capital inflow, alongside supportive policies from the upcoming "15th Five-Year Plan" [1][3]. 2. **Valuation Expansion**: The Chinese market is currently in a valuation expansion phase, with reduced fears of sanctions due to changing perceptions of US-China relations and rationalized economic policies [4][6]. 3. **Sector Recommendations**: - **Technology Sector**: Focus on AI, internet, new energy vehicles, electronic semiconductors, and media communications [5]. - **Manufacturing**: Global expansion in power equipment, machinery, and auto parts [5]. - **Aviation**: Strong fundamentals with record high passenger load factors and low ticket prices, indicating a potential super cycle [10]. - **Oil Shipping**: Record high freight rates expected to lead to the highest profits in a decade due to OPEC production increases and geopolitical factors [11]. - **Chemicals**: Optimism for leading companies benefiting from supply-side optimization and cost advantages [3][16]. - **Consumer Goods**: Opportunities in food, beverages, and retail sectors, particularly for companies with low stock and strong fundamentals [7][30]. Additional Important Insights 1. **Economic Recovery**: The upcoming year is expected to show a high probability of economic recovery, particularly in traditional sectors like cyclical and consumer goods [6]. 2. **Investment Strategies**: Investors are advised to focus on companies with low stock prices and strong fundamentals, especially in the consumer goods sector [7][9]. 3. **Brokerage Role**: Brokerages are anticipated to play a crucial role in market advancement, especially as capital market reforms progress [8]. 4. **Metal Industry Outlook**: Positive expectations for the metal sector, with industrial metals likely to benefit from global liquidity and emerging demands from AI infrastructure and new energy vehicles [18][19]. 5. **Chemical Industry Trends**: The chemical sector has seen significant supply-side optimization, with leading companies expected to benefit from a recovery in demand and pricing [13][14][16]. 6. **Oil Market Dynamics**: Current oil market conditions show a supply surplus, but OPEC's cautious production increases are expected to support prices in the medium term [24]. Conclusion The conference call highlights a generally optimistic outlook for the Chinese market across various sectors, with specific recommendations for investment opportunities in technology, aviation, oil shipping, chemicals, and consumer goods. The anticipated economic recovery and supportive policies are expected to drive market performance in the coming months.

Core Viewpoint - The chemical sector in A-shares continues its strong performance, with specific segments like phosphorus and fluorine chemicals showing positive stock movements, driven by self-regulatory actions to stabilize prices and reduce supply [1] Group 1: Industry Actions - The caprolactam industry has initiated a self-regulatory action to reduce production by 20% to alleviate inventory and price pressures, with plans to increase product prices by 100 yuan per ton [2] - This self-regulation is a response to significant losses in the industry, with losses per ton exceeding 600 yuan in recent months, prompting companies to adopt measures to balance supply and demand [2] - The proactive supply adjustments have led to a negative weekly supply-demand difference, indicating a successful transition into a destocking phase, which is expected to support price stabilization [2] Group 2: Policy Support - The National Development and Reform Commission and the State Administration for Market Regulation issued a notice to maintain good market price order, providing strong backing for the industry's self-regulatory actions [3] - The self-regulatory actions in the caprolactam sector are seen as a means to protect market price order and ensure long-term industry health [3] Group 3: Market Confidence - The self-regulatory trend is spreading across various chemical sub-industries, with the polyester filament industry previously adopting a price stabilization strategy [4] - Analysts predict that the polyester filament industry will see a decline in actual production capacity in 2024, leading to a more orderly supply increase [4] - The organic silicon industry is also showing positive self-regulatory trends, with no new capacity expected from 2025 to 2026, indicating a potential for profit recovery [4] Group 4: Industry Outlook - Current sectors such as agrochemicals, refrigerants, bioenergy, tires, and metallic chromium are in an upward cycle, with main business growth expected to remain high [5] - The ongoing push for carbon neutrality is optimizing the supply structure in high-energy-consuming chemical industries, benefiting leading companies with core technological advantages and significant scale effects [5] - The concentration of the industry is expected to increase, enhancing the competitive advantages of leading enterprises [5]

Investment Rating - The report maintains a "Positive" investment rating for the chemical industry [11] Core Insights - The chemical industry achieved a revenue of 1,947.86 billion yuan in Q1-Q3 2025, representing a year-on-year growth of 2.1%, while net profit attributable to shareholders was 115.78 billion yuan, up 4.4% year-on-year [2][18] - In Q1-Q3 2025, 50.0% of the 30 chemical sub-industries reported year-on-year growth, increasing to 56.7% in Q3 2025 [2][28] - The report highlights a gradual recovery in the industry, with capital expenditures declining by 16.9% and 2.7% in 2024 and 2025 respectively, indicating a slowdown in expansion cycles [2][18] Summary by Sections Overall Operations - The chemical industry experienced a slight revenue increase with a profit growth rate surpassing revenue growth [18] - The gross profit margin for the industry was 16.8%, a year-on-year increase of 0.2 percentage points [18] - The report notes a continued downturn in the domestic real estate market and a slow recovery in consumption [2][18] Key Sub-Industries - **Fluorochemical**: Revenue reached 32.53 billion yuan in Q1-Q3 2025, with a year-on-year increase of 19.7% and net profit up 155.6% [9][41] - **Phosphate Chemical**: Revenue was 82.38 billion yuan, down 4.0% year-on-year, but net profit increased by 8.0% to 7.55 billion yuan [49][50] - **Potash Fertilizer**: Revenue grew by 13.1% to 20.77 billion yuan, with net profit rising 57.6% to 9.44 billion yuan [9] - **Pesticides**: Revenue reached 124.65 billion yuan, up 5.6%, with net profit increasing by 131.2% to 6.38 billion yuan [9] - **Soda Ash**: Revenue fell by 15.7% to 30.16 billion yuan, with net profit down 71.5% to 0.99 billion yuan [9] - **Polyurethane**: Revenue decreased by 1.9% to 163.35 billion yuan, with net profit down 16.5% to 9.51 billion yuan [9] - **Titanium Dioxide**: Revenue was 32.92 billion yuan, down 4.2%, with net profit down 46.3% to 1.74 billion yuan [9] - **Polyester Filament**: Revenue decreased by 5.0% to 118.94 billion yuan, but net profit increased by 38.0% to 2.42 billion yuan [9] - **Additives**: Revenue grew by 3.8% to 89.06 billion yuan, with net profit up 30.0% to 12.35 billion yuan [9] - **Civil Explosives**: Revenue increased by 16.6% to 48.83 billion yuan, with net profit up 8.2% to 3.60 billion yuan [9] - **Tires**: Revenue grew by 10.7% to 119.98 billion yuan, but net profit decreased by 17.3% to 9.89 billion yuan [9] - **Electronic Chemicals**: Revenue reached 52.97 billion yuan, up 13.1%, with net profit increasing by 22.4% to 6.05 billion yuan [9] Investment Recommendations - The report suggests actively positioning in the chemical sector, highlighting cyclical recovery and potential growth in various sub-industries [10][39]

Group 1 - The 20th Central Committee's Fourth Plenary Session emphasizes the importance of effective investment and breaking down barriers to the construction of a unified national market, which may benefit leading companies in the chemical industry [1] - The report highlights that the domestic production rate of electronic chemicals and high-end polyolefins is low, indicating potential growth areas for future development [2] - The petrochemical industry faces challenges due to homogeneous production capacity, necessitating stricter management of new refining and key petrochemical projects to avoid disorderly expansion and duplication [3] Group 2 - The refining industry is identified as a key area for governance, with a significant portion of refining capacity in Shandong province, suggesting potential for capacity reduction and benefits for private refining enterprises [4] - The polyester filament industry is proactively implementing production cuts to balance market supply and demand, which may favor leading companies in the sector [4]

Core Insights - The CITIC Basic Chemical Industry Index increased by 5.02% in September 2025, ranking 7th among 30 CITIC primary industries [1][2] - Sub-industries such as lithium chemical products, electronic chemicals, and modified plastics showed strong performance [1][2] - Chemical product prices continued to decline in September 2025 [1][2] Market Review - The CITIC Basic Chemical Industry Index outperformed the Shanghai Composite Index by 4.38 percentage points and the CSI 300 Index by 1.82 percentage points in September 2025 [2] - Over the past year, the index rose by 28.23%, surpassing the Shanghai Composite Index by 11.86 percentage points and the CSI 300 Index by 12.73 percentage points [2] Sub-industry and Stock Performance - In September 2025, 16 out of 33 CITIC tertiary sub-industries rose, while 17 declined [3] - Lithium chemical products, electronic chemicals, and modified plastics increased by 32.82%, 12.09%, and 11.91% respectively [3] - Among 524 stocks in the basic chemical sector, 215 rose and 309 fell, with the top gainers including Lanfeng Biochemical and Tianji Co., with increases of 103.92% and 84.82% respectively [3] Product Price Tracking - International oil prices continued to decline in September 2025, with WTI crude oil down by 2.56% and Brent crude oil down by 1.61% [4] - Among 319 tracked products, 93 saw price increases, while 175 experienced declines, indicating an overall downward trend in basic chemical product prices [4] Industry Investment Recommendations - The industry maintains a "market perform" investment rating, with expectations for improved supply and demand dynamics due to the implementation of growth plans [5] - For October 2025, the investment strategy suggests focusing on the pesticide, polyester filament, coal chemical, phosphate, and potassium fertilizer sectors [5]

Group 1 - The chemical sector experienced a significant pullback on October 13, with the chemical ETF (516020) declining by 3.19% [1][2] - Key stocks in the sector, including Tongkun Co., Ltd., fell over 7%, while several others like Xin Fengming and Huafeng Chemical dropped more than 6%, negatively impacting the overall sector performance [1][2] - The chemical ETF has seen a capital inflow of over 80 million yuan in the last three trading days, indicating renewed interest from investors [1][2] Group 2 - The chemical industry is currently at a historical low in terms of profitability and valuation, with a profit margin of 4.14% for the chemical raw materials and products sector as of August 2025 [3] - The price-to-book ratio for the chemical ETF (516020) is at 2.4 times, which is in the 41.57 percentile of the last decade, suggesting a favorable long-term investment opportunity [3] - The construction of new projects in the basic chemical sector has seen a decline for three consecutive quarters, confirming a supply turning point and indicating a potential improvement in the industry landscape [4] Group 3 - Investment strategies suggest focusing on sectors with significant profit elasticity, such as pesticides, organic silicon, and polyester filament, which are expected to benefit from supply-side improvements [4] - The chemical ETF (516020) tracks the CSI segmented chemical industry index, covering various sub-sectors and concentrating nearly 50% of its holdings in large-cap stocks like Wanhua Chemical and Salt Lake Industry [4] - Investors can also consider the chemical ETF linked funds (A class 012537/C class 012538) for exposure to the chemical sector [4]

Core Insights - The report emphasizes the importance of monitoring the U.S. government shutdown and its impact on economic data and market sentiment, alongside the upcoming 20th Central Committee meeting in China, which will focus on the "14th Five-Year Plan" [4][2] - The market is expected to continue a trend of oscillating upward, supported by positive domestic PMI data and expectations surrounding the "14th Five-Year Plan" [4][2] - The report highlights a potential increase in foreign capital inflows in the fourth quarter, which could support the A-share market [4][2] - The core investment direction is likely to remain focused on technology assets in the near term [4][2] October Stock Picks - The October stock picks include: - China Southern Airlines (Transportation) - COSCO Shipping Specialized Carriers (Transportation) - Tongkun Co., Ltd. (Chemicals) - Yake Technology (Chemicals) - CATL (Electric New Energy) - Lingnan Holdings (Social Services) - Jinghe Integrated (Electronics) - Shenzhen South Circuit (Electronics) - GoerTek (Electronics) - Jieshun Technology (Computers) [9][10] September Performance Review - The September stock portfolio outperformed the market, with notable monthly returns exceeding 30% for CATL and Zhaoyi Innovation, and an absolute return of 4.64%, outperforming the market benchmark by 1.44 percentage points [5][6] Transportation Sector: China Southern Airlines - China Southern Airlines is a leading airline service provider with a significant market share and a robust hub network centered in Guangzhou and Beijing. The company is expected to achieve a revenue of 174.22 billion yuan in 2024, reflecting an 8.94% year-on-year growth [11][12] - The airline industry in China has seen a 172.8% growth in passenger transport over the past 15 years, with a projected domestic passenger transport volume of 730 million in 2024, a 17.86% increase [12][13] Transportation Sector: COSCO Shipping Specialized Carriers - The company reported a 44.05% year-on-year increase in revenue for the first half of 2025, reaching 10.775 billion yuan, with a net profit of 825 million yuan, marking a 13.08% increase [14][15] - The demand for specialized vessels remains strong, particularly in the automotive shipping segment, which saw a 439.87% increase in revenue [15][16] Chemicals Sector: Tongkun Co., Ltd. - The company experienced an 8.41% year-on-year decrease in revenue for the first half of 2025, totaling 44.158 billion yuan, with a notable decline in polyester filament prices due to fluctuating oil prices [16][17] - The gross profit margin improved to 6.76%, reflecting a 0.57 percentage point increase year-on-year [17][18] Chemicals Sector: Yake Technology - The company reported steady revenue growth driven by LNG and electronic materials, with a gross profit margin of 31.82% in the first half of 2025 [19][20] - The electronic materials segment saw a 15.37% year-on-year revenue increase, with significant contributions from semiconductor chemical materials [20][21] New Energy Sector: CATL - CATL is projected to achieve a net profit of 50.745 billion yuan in 2024, a 15.01% increase year-on-year, with a total revenue of 362.013 billion yuan [23][24] - The company maintains a leading position in the global battery market, with a 37.9% market share in 2024 [24][25] Social Services Sector: Lingnan Holdings - The company reported an 8.52% year-on-year increase in revenue for the first half of 2025, totaling 2.09 billion yuan, with a net profit of 50 million yuan, reflecting a 24.39% increase [26][27] - The opening of a city duty-free store is expected to enhance customer flow and boost related tourism industry growth [27][28] Electronics Sector: Jinghe Integrated - The company achieved a 28% year-on-year revenue increase in 2024, totaling 9.249 billion yuan, with a net profit of 533 million yuan, marking a 152% increase [29][30] - The company is focusing on optimizing product structure and upgrading technology processes to maintain competitive advantages [30][31] Electronics Sector: Shenzhen South Circuit - The company reported a 25.63% year-on-year revenue increase in the first half of 2025, reaching 10.453 billion yuan, with a net profit of 1.36 billion yuan [32][33] - The PCB business saw a 29.21% year-on-year increase in revenue, driven by demand in communication and data center sectors [33][34]