“Industry judgment and research, top-down” is the tried-and-tested investment framework of many fund managers. “Going out of the trough and reversing the cycle” is the stock selection logic that many sell-side analysts talk about. The combination of these sixteen words describes the chemical fiber industry that is currently in a “procyclical” state.
In the A-share market in the third quarter, many funds chose to adjust their positions in chemical fiber. For those high-end manufacturing funds that have achieved excess returns in new energy and photovoltaics, Switching to the chemical fiber sector, which has been observed and waited for for a long time, seems to have become another default option for “making a fortune silently”.
The chemical fiber industry rose silently, and then rose by another 50% after the big market situation
In early July last year After the big market ended, the chemical fiber sector’s correction was not significant. In the market for textile and apparel stocks in November due to Double Eleven and the return of foreign orders, the chemical fiber sector surged. In the three days after New Year’s Day, the chemical fiber industry index rose by more than 2% every day.
The market situation of the chemical fiber sector is supported by the performance of chemical fiber stocks. For example, the interim report of Hengli Petrochemical showed that the revenue was 67.4 billion yuan, a year-on-year increase of 59%, and the net profit was 5.5 billion yuan, a year-on-year increase of 38%; the third quarter report showed that the revenue was 103.3 billion yuan, a year-on-year increase of 35.38%; the net profit was 9.896 billion yuan, A year-on-year increase of 45.16%. With the company’s 1.5 million tons of ethylene project and PTA-5 project successfully put into operation, the company’s third-quarter revenue was 35.976 billion yuan and net profit was 4.379 billion yuan, a year-on-year increase of 56.6%, setting a record high for a single quarter and well exceeding expectations. Another example is that Hengyi Petrochemical achieved revenue of 61.3 billion yuan in the first three quarters, a year-on-year decrease of 1.4%; net profit was 3.06 billion yuan, a year-on-year increase of 38.1%; and net cash flow from operating activities was 2.79 billion yuan, a year-on-year increase of 33.5%. In the third quarter of 2020, the net profit was 1.15 billion yuan, an increase of 60 million yuan from the previous quarter.
From July 13 to January 4 last year, there were 13 companies whose stock prices increased. The top three were Hengli Petrochemical, Huafeng Chemical, and Dongfang Shenghong, which increased by 105%. ,97%,88%.
In the first half of last year, affected by the epidemic, the production of the chemical fiber industry was also affected to a certain extent. But since September last year, the chemical fiber industry has begun to experience warm winds. Supported by the return of foreign orders and the domestic Double Eleven online shopping festival, demand for textiles and clothing is strong, which has driven upstream chemical fiber prices to rise sharply. In the medium to long term, the supply and demand pattern of the chemical fiber industry continues to improve. Driven by the surge in demand for textiles and apparel in this round, the chemical fiber industry is expected to accelerate into an upward boom cycle.
In the next five years, driven by growth in high-performance fibers, industrial fibers and other fields, China’s chemical fiber market is expected to maintain a CAGR of 2.9%, reaching 57.811 million tons in 2023 .
Chemical fiber products under the “procyclical” trend have entered a growth acceleration path
The last cycle of the chemical fiber industry started in 2016, reached a high point in the summer and autumn of 2018, then collapsed into a downward cycle, and reached its most serious level in 2020. Since October 2020, the chemical fiber industry, which has been in a downturn for more than two years and has been hit by the epidemic, has begun to restart an upward cycle. According to Wind statistics, China’s Shengze Chemical Fiber Price Index continued to rise to 100.65 last week. The index continued to decline before reaching a low of 95.63 in the week of July 11, 2020, and then began to fluctuate upward. In addition, last week, the price difference of viscose staple fiber expanded by 700 yuan/ton, the profit of polyester filament per ton increased by 80-130 yuan/ton, and the price difference of spandex products expanded by 560 yuan/ton. In addition to observing the prices of chemical fiber products, we judge that the chemical fiber industry may have started an upward cycle from the following aspects:
1) The domestic chemical fiber industry is experiencing rapid growth Destocking lays the foundation for rising prices: In the early stages of the epidemic in 20H1, comprehensive blockades at home and abroad severely hit clothing retail, causing chemical fiber manufacturing to quickly accumulate inventories; in the later stages of the epidemic in 2020H2, the “cold winter concept”, “order transfer from India and Southeast Asia” and Double Ten 1. Driven by favorable conditions such as Double Twelve, the textile and apparel industry has recovered rapidly. In November, my country’s exports of textile yarns, fabrics and products increased by 31% year-on-year. The failure of the industrial chain to respond in time led to rapid destocking of the chemical fiber industry, which was at a low level in Q4 of 2020. s position.
From the perspective of the inventory cycle, the industry is currently in the third quadrant, that is, the recovery stage from active destocking to passive destocking is gradually transitioning.
2) Future cost support will drive up the price of chemical fiber: the upstream of chemical fiber is crude oil. From a supply perspective, OPEC reached an agreement on April 13, 2020 The three-stage production reduction agreement is 9.70/770/5.5 million barrels per day respectively. On June 8, 2020, the production reduction scale of 9.7 million barrels was extended to July. From January 2021, the production reduction will be adjusted and relaxed every month according to the actual situation, but the adjustment range No more than 500,000 barrels per day. This move is conducive to the slow recovery of oil prices and sets an upper limit for future incremental space. From an inventory perspective, U.S. commercial crude oil inventories have begun to show a clear destocking trend since July 2020. The current inventory level is close to the historical five-year average. In the future, with the gradual recovery of the “social economy”, inventories are expected to be further digested. Therefore, crude oil supply will be restrained in the future, and the economy�The trend of normalization of activities will drive inventory digestion and have the characteristics of strengthening. The cost side will support the rise in chemical fiber raw material prices, and the probability of cost side collapse in the future is small.
3) Restoration of overseas demand drives exports: Under the continued impact of the epidemic, the retail recovery process of the overseas apparel industry in 20H2 is relatively slow compared to other “stay-at-home economy” industries. In October 2020, the retail sales of clothing companies in Europe and Japan were -10%, -13%, and -10% year-on-year. During the same period, domestic sales have returned to positive growth. The clothing and fabric inventories of U.S. wholesalers are also at historically low levels year-on-year. With the demand side expected to continue to recover in 2021, there is demand for replenishment overseas, which is expected to boost domestic textile and clothing exports.
To sum up, under the background of the improvement of the epidemic situation in the future, the recovery of terminal demand, the improvement of the industrial structure and the expectation of inventory replenishment, the chemical fiber industry is expected to welcome Let’s have a good business cycle. According to estimates by industry insiders, the general chemical fiber industry has an upward cycle of about 3 years and a downward cycle of about 2-3 years. Relevant listed companies are expected to usher in a turning point in performance as prices of chemical fiber products rise. </p
