Wanhua Chemical Group Co., Ltd

Income statement

The "7" entered is a typographical error and should be disregarded.

Sources and notes: - Revenue and net profit: FY2021 (Jiemian), FY2022 (China Securities Journal, 21 Mar 2023), FY2023 (Securities Star, 20 Mar 2024), FY2024 (The Paper, 15 Apr 2025), FY2025 (annual report via Securities Market Weekly / Eastmoney, 20 Apr 2026).

• FY2024 recurring net profit is derived from the FY2025 figure (RMB 12.144bn, -9.10%).

• FY2023 gross margin is derived from the FY2024 figure (16.09%, -0.62pp). FY2021 gross margin is implied at about 26–27% (FY2022 was "down nearly 10pp"), so it is left blank.

• DPS: FY2022 RMB 1.60 (CSJ). FY2024 = interim 0.52 + final 0.73 (Wallstreetcn; Gelonghui). FY2025 final 1.25 (no interim in 2025).

• R&D: FY2022 disclosed. FY2024 and FY2025 derived from expense ratios (2.50% and 2.39%) per Huachuang.

• Diluted EPS equals basic; no dilutive instruments were identified.

• Operating income, EBITDA and pre-tax income are not disclosed in the sources reviewed (Chinese statements report 营业利润, which was not captured).

Revenue CAGR FY2021–FY2025: (203.24 / 145.54)^(1/4) − 1 = 8.7% p.a. (derived). Over the same period attributable net profit fell at about −15.6% p.a., reflecting margin compression from the 2021 super-cycle peak.

Quarterly trajectory: notes and sources

Sources: The Paper (Q4 2024, Q3 2025); PUdaily (Q2 2025); Echemi (Q4 2025 ≈ RMB 3.37bn); Lanjinger (Q2 2026 gross margin 19.04%, +6.88pp YoY, so Q2 2025 is derived at 12.16%); Huachuang (Q1 2026).

Balance sheet

Sources and notes: FY2022 total assets and equity: CSJ: - FY2021 total assets and equity are derived from FY2022 growth (+5.53%, +12.18%).

FY2023 total assets derived from FY2024 growth (+15.92%): - FY2023 liability ratio derived from FY2024 (+2.05pp).

• FY2024 equity and BVPS derived from FY2025 growth (+14.46%, +14.80%).

• FY2025: total assets, equity, BVPS and leverage from Eastmoney / Shenzhen Commercial Daily (20 Apr 2026). Construction in progress, fixed assets and right-of-use assets: Eastmoney (24 Apr 2026). FY2024 fixed assets derived (FY2025 minus RMB 38.08bn increase). FY2024 right-of-use assets derived (+65.86%).

• Cash: CSJ quarterly balance sheets (FY2022, FY2023). FY2025 from TradingEconomics.

Debt. TradingEconomics reports total debt of about RMB 135.1bn at end-2025, with loan funding of RMB 69.95bn. Short-term borrowings rose 59% to RMB 56.4bn at 30 Jun 2025 (FilingReader, from the H1 2025 report). Outstanding MTNs and commercial paper total more than RMB 11.2bn at coupons of 1.56–2.30% (2026 interim report, via Wallstreetcn).

Net debt. Approximately RMB 99bn at end-2025 on a gross debt minus cash basis (derived from TradingEconomics). MarketScreener consensus estimates net debt of about RMB 79–83bn for FY2025E. The discrepancy likely reflects definitions (e.g., treatment of notes/bills and restricted cash).

Cash flow

Notes: - FY2025 OCF is from the annual report via Securities Market Weekly. H1 2025 OCF was RMB 10.53bn (+2.3%) and H1 2024 was RMB 10.29bn.

• Project investment completed is from the FY2025 AGM materials (Securities Market Weekly, Sep 2026). The 2026 project investment plan is RMB 27.3bn.

• FY2024 dividends are derived: interim RMB 1.633bn plus final 0.73 × ~3.13bn shares.

• FY2025 buyback is derived from total shareholder return of RMB 4.413bn minus dividends of RMB 3.913bn. Combined payout was 35.23% of FY2025 net profit (10jqka).

• Cumulative cash dividends since listing: RMB 50.2bn to end-2025.

• Using project investment as a capex proxy gives FY2025 FCF of about RMB 9.3bn (derived; indicative only).

Ratios

Notes: - Weighted ROE FY2025 is from Eastmoney. FY2024 is derived (+1.85pp). FY2023 is from Lixinger's maximum-year statistic, which is consistent with FY2023.

• Current ratio uses TradingEconomics current assets of RMB 93bn and current liabilities of RMB 138.5bn at the latest report.

• ROIC, debt/equity on a disclosed basis, net debt/EBITDA, interest coverage and the cash conversion cycle are not disclosed in the sources reviewed.

• Indicative gearing: net gearing of about 1.05x was reported by a third-party SWOT vendor. The TradingEconomics-based derivation gives roughly 0.9x net debt to attributable equity.

H1 2026 snapshot

The interim dividend totals RMB 2.536bn. Record date was 10 Sep 2026; ex-date and payment date 11 Sep 2026 (Stockstar). This follows Chairman Liao's 22 Jul 2026 proposal that the 2026 interim payout be at least 25% of first-half net profit.

Commentary on trends, inflections and drivers

Revenue. Growth has been volume-led since 2022. New capacity came on stream in Fujian MDI/TDI, PO/SM, POCHP, ethylene phase II and specialty plants, while product prices broadly fell. FY2025 is the clearest example: volumes rose about 12–26% across segments, but MDI/TDI prices fell (polymeric MDI down about 19.6% YoY by year-end per Zhuochuang data cited by Eastmoney). The petrochemical "trade" component adds revenue without much margin.

Margins. Consolidated gross margin has compressed in steps: about 26–27% in 2021, 16.6% in 2022, 16.7% in 2023, 16.1% in 2024, and 13.6% in 2025. The drivers were (i) raw-material inflation in 2022 (benzene, coal, LPG); (ii) a rising petrochemical revenue mix at near-zero margin (0.58% in FY2025); and (iii) heavier depreciation. Fixed assets grew RMB 38bn in FY2025 as construction in progress was transferred into service, and accumulated depreciation rose to RMB 76.4bn (Eastmoney).

Polyurethanes were the stabiliser, with gross margin up 0.73pp to 26.88% in FY2025.

The inflection came in Q2 2026. Quarterly gross margin jumped to 19.04%. Geopolitical disruption in the Middle East cut competitor supply: the Sadara complex in Jubail suspended output, removing roughly 400 kt/yr MDI and 200 kt/yr TDI (Huaan Securities). At the same time, Wanhua's ethane-fed ethylene phase I benefited from weak ethane prices against oil-linked olefin prices.

Cost structure and quality of earnings. Government subsidies declined from RMB 756m (2023) to RMB 518m (2024) and RMB 474m (2025). FY2025 included RMB 266m of fair-value gains (Eastmoney). The gap between recurring and attributable profit is therefore modest. Opex discipline improved: selling, G&A, finance and R&D expense ratios all declined in FY2025.

Balance sheet. Leverage peaked at a 64.7% liability ratio in 2024 during the capex wave. It eased to 62.8% in 2025 as the construction-in-progress balance halved (RMB 63.2bn to RMB 34.6bn) and PIC's US$638m equity injection arrived. Rising right-of-use assets (+66%) imply that some growth is now financed off the capex line through leases, which locks in long-term payment obligations.

Shareholder returns. The payout policy is evolving toward regular interim dividends: an interim in 2024, none in 2025, and an interim in 2026 at a committed ≥25% of H1 profit. Buyback-and-cancellation is used opportunistically. In H1 2025 the company repurchased 9.3m shares for RMB 445m.

Management guidance

There is no formal numeric guidance. Disclosed forward items are:

• the 2026 project investment plan of RMB 27.3bn, weighted to emerging materials;

• the Fujian MDI debottleneck (+0.7 Mt/yr), polyether debottlenecks, European and Sichuan LFP, and graphite anodes;

• the interim dividend policy of at least 25% of H1 profit.

The H1 2026 report does not provide a detailed H2 product outlook.

Consensus expectations

Brokers forecast 2026 net profit of about RMB 20.1–20.2bn, roughly +60% YoY. That implies H2 2026 net profit of about RMB 10bn, broadly flat on H1. Forecasts for 2027 are RMB 21.2–23.2bn and for 2028 RMB 22.7–27.1bn (SDIC, Huaan).

Bull case

1. Isocyanate up-cycle with a structural supply backdrop. There are virtually no global MDI additions before 2030 and no TDI additions before end-2027. Combined with Sadara-type outages, this lets Wanhua capture spreads with growing volume. H1 2026 average TDI price was +31% and Q2 gross margin reached 19%.

2. Petrochemical turnaround. The ethane-fed cracker plus ethylene phase II (2.4 Mt/yr in total) converts the weakest segment from a 0.58% gross margin toward normal levels. The oil-linked olefin vs. ethane spread widened in 2026.

3. Second growth curve plus capital returns. Fine chemicals revenue grew +44% in H1 2026. Battery-material customer wins add a structural growth story. The stock trades on about 11x 2026E earnings with a rising payout and a ~2.8% TTM yield.

Bear case

1. Windfall reversal. H1 2026 profit was inflated by geopolitical supply shocks. If Middle East supply normalises and Chinese construction stays weak, MDI and TDI prices could retrace, as happened after 2021.

2. Capital intensity and leverage. About RMB 27bn of annual capex, around RMB 135bn of gross debt, and rising depreciation and lease charges cap free cash flow. The return on battery capex is doubtful in an oversupplied LFP market.

3. Trade-barrier escalation. Export growth in 2026 makes Wanhua more visible to anti-dumping and tariff regimes. Gulf-backed competitors such as ADNOC-Covestro reduce its long-run cost edge.

Catalysts and monitorables (next 12 months)

Analyst verdict

Wanhua Chemical enters Q4 2026 at the most favourable point in its earnings cycle since 2021. The two-year profit decline of 2024–2025 was largely a price phenomenon. Underneath it, volumes kept compounding at double digits, the polyurethane franchise held a gross margin near 27%, and a RMB 60bn+ construction-in-progress balance was converted into productive assets. The second quarter of 2026 showed the operating leverage that results. Revenue rose 36% but net profit doubled, as external supply shocks met a lower cost base from the ethane conversion and newly commissioned capacity.

The investment debate is now about durability, not quality. On a structural view, the isocyanate oligopoly is the best-protected sub-sector in global commodity chemicals: supply additions are scarce through the decade and Wanhua is the cost leader. That supports through-cycle earnings well above the RMB 12.5bn trough of 2025. On a cyclical view, a material part of 2026's uplift is windfall from Middle East disruption and will fade as supply normalises.

Our synthesis is that FY2026 earnings of around RMB 20bn, in line with consensus, are achievable. The more important question is whether FY2027 holds at or above RMB 18bn. That depends on (i) delivery of the Fujian MDI expansion, (ii) petrochemical margins staying positive on ethane economics, and (iii) battery materials avoiding value-destructive pricing.

Governance is SOE-standard: a stable, technocratic management team and a newly formalised dividend cadence, offset by concentrated control and committee overlap.

At roughly 11x forward earnings, 2.1x book and a near-3% yield, the valuation does not price in peak-cycle earnings. The key risk to this view is a rapid normalisation of global isocyanate supply coinciding with escalating trade barriers.

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Sources consulted (primary and secondary)

• Wanhua Chemical SSE announcements: FY2024/FY2025 annual reports and summaries; Q1 2025, Q1 2026 and Q3 2025 reports; 2025 and 2026 interim reports and operating-data announcements; board renewal (临2026-34, 41, 42, 43, 47); turnaround and restart notices. Accessed via Shanghai Securities News (paper.cnstock.com), China Securities Journal e-paper (epaper.cs.com.cn), and cninfo.

• Financial press: The Paper; Jiemian; Wallstreetcn; Securities Times / Stockstar; Securities Market Weekly; Eastmoney / Shenzhen Commercial Daily; 10jqka; Lanjinger; Caixin; China Securities Journal; Beijing News; Cailian Press.

• Broker research (via Gelonghui / Eastmoney PDF): SDIC Securities, Huaan Securities, Guosen Securities, Kaiyuan Securities, Great Wall Securities, Huachuang Securities.

• Industry and data sources: PUdaily; Guidechem; SunSirs; SpecialChem; European Coatings; Gasworld; Xueqiu; MarketScreener; TradingEconomics; FilingReader; Lixinger.

• Kyriba case study.