Summary of Huicheng Environmental Conference Call Company Overview - **Company**: Huicheng Environmental - **Industry**: Environmental and Chemical Recycling Key Points and Arguments Product Quality and Market Position - The quality of Huicheng Environmental's reformed oil is better than expected, with aromatic content increased to 84%-85% [2][3] - The company has partnered with United Petrochemical for testing, expecting positive application results [2][3] - The hydrogenation unit is projected to start production in January 2026, which will address oxygen content issues [2][7] Financial Performance and Pricing - Current aromatic prices are high, around 6,000-6,800 RMB per ton, with a potential premium of 3,000 RMB after hydrogenation, bringing the total price close to 10,000 RMB [2][4] - The profit from the 200,000-ton project without premium is estimated at 200-300 million RMB, which could rise to 600-700 million RMB with premiums [2][8] - The target profit for Q4 this year is set at 100 million RMB [2][8] Expansion Plans - Huicheng Environmental plans to build a total capacity of approximately 10 million tons in the next 3-5 years across various locations, including Guangdong, Hunan, and Tianjin [3][9][12] - Specific projects include a 3 million-ton project in Guangdong and a 1.8 million-ton project in Yueyang, with approvals expected by the end of this year [3][9][12] Technological Innovations - The company utilizes a catalyst that directly contacts plastic for solid-gas conversion, achieving over 90% yield [3][17] - Innovative reverse flow bed technology addresses temperature gradient issues during deep cracking, enhancing efficiency [3][17][18] - The company’s process is designed to minimize liquid phase crossover, significantly improving yield [3][17] Strategic Partnerships and Financing - Initial funding for projects will primarily come from bank loans, covering about 70% of the required capital [3][13] - Local governments and enterprises show high investment enthusiasm, facilitating financing [3][13] - Collaboration with China Resource Recycling is planned to enhance raw material sourcing [3][20] Market Demand and Customer Base - Major customers include United Petrochemical, Lito, and Maohua Petrochemical, with contracts signed with companies like Amcor and L'Oréal for polypropylene trials [2][4] - The demand for Huicheng's products is strong due to superior quality and green labeling, with prices for recycled plastics expected to be competitive [3][15] Regulatory and Certification Outlook - The company anticipates receiving official certifications and support from industry associations, which may enhance its market position [3][19] Future Projections - The company expects to achieve full production capacity by early 2026, with ongoing experiments to optimize processes for future expansions [3][27] - The pricing strategy post-hydrogenation is set to reflect the added value, with contracts already established for supply [3][28] Challenges and Considerations - The company faces challenges in managing raw material quality and ensuring efficient processing, particularly with mixed plastics [3][29] - Continuous adjustments in operational conditions are necessary to optimize product distribution and quality [3][25] Additional Important Information - The company is committed to maintaining a leading position in the recycling technology sector, with a focus on innovative processes that enhance yield and reduce costs [3][16] - Huicheng Environmental is exploring the potential for expanding its processing capabilities to include other types of plastics in the future [3][29]

1. Report Industry Investment Rating - The investment view is "oscillating", and it is expected to be mainly bearish as there is no obvious driving force [3]. 2. Core View of the Report - The report analyzes the polyester industry from multiple aspects including supply, demand, inventory, etc. It points out that due to factors such as the decline in crude oil prices, the return of domestic PTA device supply, and the seasonal weakening of aromatics, the PTA market shows a weak trend. Although the downstream load of polyester remains at a high level, there is still no obvious driving force in the market, and it is expected to be mainly bearish [3]. 3. Summary According to Relevant Catalogs 3.1 Main Views and Strategy Overview - **Supply**: Bearish. Crude oil prices are falling, domestic PTA device supply is gradually returning, PTA basis is weakening, and PX device operating rate is rising while the spread between PX and naphtha is shrinking [3]. - **Demand**: Bullish. The downstream load of polyester remains at about 91%, the inventory of polyester factories is optimistic, and the load of the weaving end has increased slightly [3]. - **Inventory**: Neutral. PTA port inventory has decreased by 40,000 tons [3]. - **Basis**: Bearish. PTA basis has weakened rapidly, profits have continued to shrink, and market liquidity is very loose [3]. - **Profit**: Bearish. The spread between PX and naphtha is $220, and PTA processing fees remain at around 150 yuan and have shrunk [3]. - **Valuation**: Neutral. PTA prices are at a neutral to low level, and aromatics supply has increased due to the return of reforming devices and the postponement of domestic PX mainstream device overhauls [3]. - **Macro Policy**: Neutral. The Fed cut interest rates by 25 basis points in September [3][8]. - **Investment View**: Oscillating. Expected to be mainly bearish with no obvious driving force [3]. - **Trading Strategy**: Unilateral: Wait and see. Risk focus: Geopolitical risks [3]. 3.2 Oil Product Fundamentals Overview - **Crude Oil**: Geopolitical crises still exist, and prices have dropped significantly. Trump called for further price cuts. Russian weekly crude oil exports decreased sharply in the week of September 14, but the four - week average export volume increased slightly. The Fed cut interest rates by 25 basis points on September 18 [5][8]. - **Gasoline**: The peak season for gasoline is ending, and the premium of high - octane components is weakening. Refinery operating rates have risen to 94.9%, gasoline production has decreased to 9.6 million barrels per day, and total gasoline inventory has increased by 1.5 million barrels compared to last week. The driving season will end at the end of September [23]. 3.3 Aromatics Fundamentals Overview - **Supply - Side Changes**: Overhauled devices are returning, and Yulong Petrochemical's supply has increased. Some refineries have device maintenance and new device production plans, which will affect the supply of pure benzene, toluene, and xylene [32][53]. - **Profit Situation**: Selective disproportionation profit has declined, and pure benzene prices are suppressing disproportionation profit. The spread between PX and naphtha has shrunk, and PX short - process profit is still supported [49][54]. - **Market Conditions**: The US - Asia MX spread has widened, but there is no news of exports from South Korea to the US. The spot PX price is gradually falling, and the spread between PX and naphtha has decreased [60]. 3.4 Polyester Fundamentals Overview - **Ethylene Glycol**: Supply is returning, and prices are weak. East China ethylene glycol port inventory is 465,000 tons and is expected to continue to decline. Overseas imports are expected to decrease, but domestic device production is pressuring prices [75][83]. - **Polyester**: It maintains a high load, but production is increasing while the downstream is entering the off - season. PTA basis has declined rapidly, and the market is under pressure [89][101].

1. Report Industry Investment Rating - The investment view is "oscillation", and it is expected to be mainly bullish, with no obvious driving factors [4]. 2. Core View of the Report - The supply side is bearish as crude oil prices fall, domestic PTA device supply gradually returns, and the PTA basis weakens [4]. - The demand side is bullish as the downstream load of polyester maintains around 91%, and the inventory performance of polyester factories is optimistic [4]. - The inventory situation is neutral as the port inventory of PTA decreased by 10,000 tons this week and continues to decline [4]. - The basis is bearish as the PTA basis weakens slightly, and the PTA profit remains at a low level [4]. - The profit is bearish as the spread between PX and naphtha is at $230, and the PTA processing fee remains at around 200 yuan and has shrunk [4]. - The valuation is neutral as the PTA price is at a moderately low level, and the supply of aromatics has increased [4]. - The macro - policy is neutral as the Ministry of Finance continues to implement a package of debt - resolution measures [4]. 3. Summary by Relevant Catalogs 3.1 Part One: Main Views and Strategy Overview - Supply: Bearish. Crude oil price decline, increased supply from Huizhou PTA in China, and weakening PTA basis [4]. - Demand: Bullish. Polyester downstream load around 91%, optimistic inventory, and increased load in bottle - chip varieties [4]. - Inventory: Neutral. PTA port inventory decreased by 10,000 tons this week [4]. - Basis: Bearish. Slightly weakened PTA basis and low profit [4]. - Profit: Bearish. PX - naphtha spread at $230, and PTA processing fee around 200 yuan with contraction [4]. - Valuation: Neutral. PTA price at a moderately low level, increased aromatics supply [4]. - Macro - policy: Neutral. Ministry of Finance's debt - resolution measures [4]. - Investment view: Oscillation, expected to be mainly bullish [4]. - Trading strategy: Unilateral - wait and see, pay attention to geopolitical risks [4]. 3.2 Part Two: Oil Product Fundamental Overview - Gasoline: Peak - season destocking but approaching off - season. Refinery operating rate decreased from 94.6% to 94.3%, gasoline inventory decreased by 3.8 million barrels, and demand is expected to enter the off - season [25]. 3.3 Part Three: Aromatics Fundamental Overview - Some devices plan maintenance, and Yulong Petrochemical's supply increases [33]. - Asian naphtha price is firm, gasoline cracking spread rebounds slightly, and the spread between regular gasoline and naphtha cracking widens [44]. - The profit of selective disproportionation of aromatics decreases slightly [49]. - MX cross - regional arbitrage is marginally feasible, and the spread between the US and South Korea is around $187 [54]. - Asian MX spot price weakens, and the spread between MX and naphtha narrows to $88/ton [61]. - The gasoline reforming and aromatics reforming are both acceptable, but PTA performs weakly due to falling crude oil prices and weakening basis [72]. 3.4 Part Four: Polyester Fundamental Overview - Ethylene glycol: Supply returns, and the price is weak. The port inventory in East China is 459,000 tons and is expected to continue to decline [86]. - Gasoline: The load of major refineries increases [88]. - Polyester: The load maintains at a high level, and the production increases, waiting for downstream feedback [95][107].