Wanhua Chemical Yantai Industrial Park MDI Plant Stopped Inspection. By 2022, The Total Profit Will Exceed 15 Billion.

The world's largest MDI manufacturing enterprise, Wanhua chemical group, Limited by Share Ltd (hereinafter referred to as "Wanhua chemical") announced in the evening of June 13th that according to the characteristics of the production process of the chemical industry, in order to ensure the safe and effective operation of the production plant, according to the annual maintenance plan, the MDI integrated device of the Yantai Industrial Park (600 thousand tons / year) will start to stop and repair in June 21, 2019, and it is expected to overhaul for about 20 days.

Wanhua chemical said the shutdown is a routine overhaul according to the annual plan, which will not affect the production and operation of the company.

According to public information, Wanhua chemical was founded in 1998. It is the only factory in China that has mastered MDI production technology. Its MDI capacity has also grown from 10 thousand tons in 1994 to the world's largest 2 million 100 thousand tons. In 2018, it completed the merger and became the global MDI industry leader.

Insiders said that as the only enterprise in China to have independent intellectual property rights of MDI manufacturing technology, Wanhua chemical started from the earliest 10 thousand tons MDI production plant, and gradually expanded MDI capacity through technological pformation and expansion, new capacity production and merger and absorption. At present, it has formed 2 million 100 thousand tons of MDI capacity and has become the leading MDI in the world.

With the breakthroughs in the MDI production technology, the company has two domestic production bases, and the pformation capacity is 1 million 500 thousand tons and 1 million 100 thousand tons respectively. At the same time, the company plans to build a new production base in the United States, with a planned capacity of 400 thousand tons.

Wanhua chemical has formed a MDI based product structure, which is accelerating the development of petrochemical series and specialty chemicals.

In 2018, Wanhua income polyurethane accounted for 51%, petrochemical sector accounted for 31%, specialty chemicals accounted for 9%, profit composition, polyurethane, petrochemical plate and specialty chemicals gross profit accounted for 76%, 9%, 9%.

The future petrochemical sector revenue and profit growth rate will benefit from the production capacity, and is expected to achieve a relatively rapid growth. However, Pu is still the main profitable sector of the company.

Ni Ji, an analyst with Orient Securities, said that the MDI industry chain is very long. The two major production bases of Wanhua chemical industry are more perfect than the other domestic enterprises, and the supporting cost of the industry chain is even lower.

Therefore, in the MDI industry boom in 2015, Wanhua chemical can still maintain a gross margin of 30%.

Calculation, the current cost advantage of its single ton MDI is about 2110 yuan, corresponding to the domestic 2 million 200 thousand tons annual output of excess profit of 3 billion 500 million yuan.

For chemical industry, Ni Ji believes that the core competitiveness is mainly embodied in three aspects: first, the reduction of production cost brought about by integration and scale; secondly, the cost savings brought by management capability; and finally, the entry barrier brought by technological innovation capability.

Most of the leading enterprises in China have excess profits mainly from the first two points, that is, the ability to control costs is strong.

But Wanhua chemistry goes further, with the three comparative advantages mentioned above.

Historically, the core of Wanhua's early supernormal development lies in the realization of technological breakthroughs in domestic MDI, and the technological monopoly has been maintained so far.

In the past two years, the company has been making technological breakthroughs in the high-end fields such as new materials and specialty chemicals, and technological innovation has also become the core competitiveness of Wanhua. It is estimated that by 2022, the total technical barriers will bring 4 billion 300 million of the excess profits to Wanhua chemical.

Ni Ji further pointed out that for the MDI, the most important product of Wanhua Hua, the next three years will have an additional capacity of 1 million 960 thousand tons and a compound growth rate of over 5%.

Corresponding to the annual growth of about 4% of the global demand, it is expected that the operating rate will decline, but it is still within a reasonable scope.

However, for industries such as MDI, which are in an oligopoly pattern for a long time, unless the serious imbalance between supply and demand is concerned, the price is generally not very linked to supply and demand.

But Ni Ji also admitted that the biggest risk for the industry in the future is that the industry profits in the past few years are at an extremely abnormal level. Even though their barriers are very high, they are not enough to support the ROE of up to 50% of the enterprises at that time. This will not only stimulate the new capacity of the existing enterprises, but also attract potential new entrants.

Although the strength of the new entrants is far inferior to that of the existing enterprises, the barrier of thousands of miles is destroyed by the nest. Once the opportunity for the new players to gain a firm foothold, the negative impact on the industry pattern can not be ignored.

Therefore, for the existing capacity, a more reasonable choice is to control the price as far as new production capacity is difficult to earn before the new capacity is put into operation, and eliminate its desire to put into production.

In fact, any oligopoly pattern can be established. Besides the barrier of height, the credible threat to the potential entrant is also a key factor. Otherwise, the MDI industry will not be able to maintain a new entry for more than 20 years.

Ni Ji said that from the current round of production capacity, Wanhua chemical company reached 1 million 250 thousand tons, accounting for more than 60%, further strengthening its capacity advantage.

Moreover, the investment scale of the company's newly added capacity units is expected to be very low, and the advantage of single ton depreciation will be further expanded than that of overseas comparable companies.

Therefore, for Wanhua's 800 thousand tons of new domestic products, it is far less competitive than the competitors' unit investment, which is enough to constitute an asymmetric blow to competitors and potential entrants.

At present, the total cost of Wanhua competitor MDI is about 10500 yuan / ton, and the income tax rate is 25%. It is estimated that the industry ROE (60% liability ratio) will drop to 15%, corresponding to the comprehensive MDI price of about 12000 yuan / ton.

At this price, the existing capacity of the industry can be profitable, but it is also difficult to have too much power to expand production, and the expected profit of potential entry will be greatly reduced, thus being pushed back; Wanhua can release its huge capacity.

Assuming that the MDI operating rate of the company is still maintained at 85% in 2022, corresponding to the total output of about 2 million 550 thousand tons, the total profit of Wanhua will be about 15 billion 200 million yuan.

Overall, Ni Ji believes that the future business increment of Wanhua chemical mainly comes from three directions: 1, the supporting polyether production capacity is expected to bring about 620 thousand tons of PO and more upstream 500 thousand tons of propylene potential growth space, corresponding to the profit margin of 1 billion 600 million yuan; 2, with the overseas differential competitor hensmann and cossson's Polyurethane differentiation level as the standard, comprehensively fill up the downstream polyurethane short board, will greatly enhance the company's profitability and stability; 3, the new material and functional chemicals sector is expected to maintain the current annual income and profit growth rate of 25%, and even does not rule out the development of mergers and acquisitions to accelerate development.

In the case of relatively stable capacity, the company's mid and short-term performance will remain highly sensitive to the market price of products such as MDI and TDI. To a large extent, it will guide the market to judge its performance expectations. In the medium and long term, on the one hand, the company has expanded the petrochemical, fine chemicals and new materials business in recent years to solve the problem of single product risk, but has provided the industrial chain synergy, through the mismatch of the industry cycle. It will improve the company's profit source structure, partly resist the adverse effects of the periodical fluctuation of the polyurethane industry, and enhance the overall profitability stability. On the other hand, Wanhua Chemical Co., Ltd. in February 2019 will achieve the company's overall listing by adding new shares, and the US MDI integration project is expected to be completed in 2011. Cheng Yimin, a Securities researcher at China Post, thinks that in the short term, the contribution of Wan Hua chemical polyurethane is nearly 80%.