万华化学：符合预期，行政费用下降 3 亿元；毛利率创历史新低；2026 财年 160 - 180 亿元利润仍难实现-Wanhua Chemical - A_ 2Q in line, with Rmb300mn q_q fall in admin expense; GPM falls to new record low; Rmb16bn-18bn FY26_27 still elusive

Summary of Wanhua Chemical Conference Call Company Overview - Company: Wanhua Chemical - Industry: Chemicals, specifically polyurethanes - Market Share: ~30% for MDI, 19% for TDI, and 21% for aliphatic diisocyanates (ADI) [12][62] Key Financial Performance - 2Q NP: Rmb3 billion, down 1% q/q and 24% y/y, in line with expectations [2] - 1H25 NP: Represented 46% of the full-year estimate of Rmb13.2 billion [2] - GPM: 12% in 2Q, the lowest since 2002; 1H25 GPM turned negative for the first time in history at -0.4% [8][12] - Admin Expenses: Decreased by 41% q/q and 40% y/y to Rmb438 million, the lowest in recent years [8][27] Operational Insights - Fujian Connell Expansion: 330ktpa expansion started trial operations in July; slow ramp-up expected due to weak demand [2][19] - TDI Prices: Increased by 43% in July to Rmb16,700/t due to Covestro's force majeure; however, demand remains sluggish [8][19] - Capacity Updates: Major expansions planned, including a 700ktpa MDI capacity increase pending environmental approval [19] Market Dynamics - Impact of US-China Trade War: Escalation may lead to lower earnings for MDI exports and chemicals linked to global GDP/PMI [12][62] - TDI and MDI Spread Sensitivity: Wanhua is more exposed to MDI than TDI; a Rmb1,000/t increase in TDI spread could impact EPS by 4% [19] Financial Forecasts - FY25 NP Forecast: Expected decline of 5% y/y to Rmb12.4 billion [2] - Price Target: Rmb55 based on a 15x one-year forward P/E, consistent with historical averages [13][63] - Consensus vs. JP Morgan Estimates: JP Morgan's NP estimates are lower than consensus for FY25 and FY26 [23] Risks and Considerations - Tariff Impacts: Ongoing tariffs may affect earnings from MDI exports and other chemical products [12][62] - Demand Weakness: Slow demand recovery could limit price increases and affect profitability [8][19] Additional Insights - Cost Control: Management attributed flat performance to improved cost control despite declining MDI spreads [2] - Future Capacity: New capacities expected to come online in 2H25-1H26, including expansions in Hungary and Xinjiang [19][26] This summary encapsulates the key points from the conference call, highlighting Wanhua Chemical's financial performance, operational updates, market dynamics, and future outlook.