万华化学（A）：2026年一季度反弹符合预期；MDI利润率改善，维持买入评级

improvingMaintainRating:BUYIPO:95.00CNY/Price:87.54CNY FY25dividend&repurchasea/cfor35%ofNPAT down 4% YoY, in line with the preliminary report. OCF was RMB33bn, +10% YoY. Mgmt.declared FY25 DPS of RMB1.25 and completed RMB50Omn of share buybacks, fully Yiming Wang >> utilizing the authorization. Total cash returns represented 35% of FY25 earnings.1Q26 +21% YoY, inline; GPM rebound & expenses cut1Q26NPAT was RMB3.7bn, up 21%YoY and in line with market expectations.Revenue Research AnalystMerrill Lynch (Hong Kong) yiming.wang@bofa.comMatty Zhao >>Research AnalystMerill Lynch (Hong Kong)+852 3508 4001 rose 26%YoY to RMB54bn.By segment, PU revenue increased 5% YoY to RMB19bn on matty.zhao@bofa.comMatthewYates>>Research AnalystMLI (UK) 14% YoY volume growth to 1,650kt; fine chemicals rose 40% YoY to RMB10bn, drivenbya35%YoYvolume increase; andpetrochemicalsgrew26%YoYtoRMB21bn withvolumes up25%YoY.Grossmargin improvedto 15% in1Q26 (vs.16% in1Q25and14% in 4Q25). Despite narrower domestic MDI margins in 1Q26, the GP was supportedby expanded TDI and higher overseas MDI margins. Discretionary cost control loweredexpenses to 4.4% of revenue (down 1.7ppt). The effective interest rate was stable, whilethe effective tax rate rose to 17% from 12% in 1Q25.Minority interests increased to15% of net profit from 9%, mainly due to the ramp-up of the Fujian capacity.MDI marginexpanding;diversified petchemfeedstock +44 20 7996 4537matthew.yates@bofa.comMatthew DeYoe, CFAResearch AnalystBofAS +1 646 855 5746matthew.deyoe@bofa.com Accordingly, our tracked MDImargin expanded to RMB8.7k/t from RMB5.4k/t in 1Q26, as product price increases outpaced costs. TDI margins also improved, underpinning ourpositive view on core PU earnings. On 8 April, the U.S. Department of Commercefinalized antidumping duties on Chinese MDi, setting Wanhua's rate at 85.11%, sharplybelow the preliminary 376-512%. Limited shipments to the US could resume in China'soff-peak season if the U.S.-China price spread widens. We remain cautious onpetrochemicals; however, Wanhua's access to ethane places it in a stronger positionthan Asian peers reliant on naphtha and LPG. Maintain Buy, given its robust MDI earningand diversified feedstock sources. It is now trading at 17x 26E PER.Estimates (Dec) (CNY)2023A2024A2025E2026E2027E Price >> Employed by a non-US affiliate of BofAS and is not registered/qualified as a research analystunder the FINRA rulesRefer to"Other Important Disclosures' for information on certain BofA Securities entities that take responsibility for the information herein in particular jurisdictions.BofA Securities does and seeks to do business with issuers covered in its research reports. As a result, investors should be aware that the firm may have a conflict ofinterest that could affect the objectivity of this report. Investors should consider thisreport as only a single factor in making their investment decision.Refer to important disclosures on page 7 to 9.Analyst Certification on page 4. PriceObjective Basis/Risk on page 4. Key Income Statement Data (Dec)2023A2024A Chemicals-Specialty Wanhua Chemical was established on 20 December 1988 and was listed on the Shanghai Stock Exchange (600309CH) on 5 January 2001. Wanhua is a globally operatingchemical new materials company, mainly engaged in theR&D, production and sales of a full range of polyurethaneproducts, petrochemical products, and specialty chemicals.It is the most competitive MDI producer in the world, withtotal MDI capacity of 3.05mtpa, accounting for 32% ofglobal total. It is actively expanding in all divisions. We are positive on Wanhua Chemical's earnings outlook as its core MDI business is boosted by new capacity add andfurther room to cut costs and a long list of new capacitiesacross several high-demand specialty chemical products.Wanhua is well positioned in China's transition to lowcarbon, consumer-driven economy and its strong R&Dcapability helps to reduce China's reliance on importedspecialty chemicals. Stock Data Price to Book Value OCF: operating cash flow DPS: dividend per shareGPM: gross profit marginPU:polyurethanePetchem: petrochemicalFine chem: fine chemical(p-)MDI: (polymeric-) Methylene diphenyl diisocyanateTDl: Toluene disocyanateMTD: month-to-dateKt:'0oo ton Wanhua Chemical (YWNHF) Our 12-month PO of CNY95 is based on a sum-of-the parts (SOTP) valuation, with 9.Ox- 10.7x EV/EBITDA on 2026E EBITDAfor its core operations.For PU, we use 9.3x'26/27Eaverage EV/EBITDA. Global PU peers are trading at 10.6x/9.0x in 2026/27E multiple(market cap weighted average).For petrochemicals, we use 9.Ox EV/EBITDA, whenChinese petrochemical peers are trading at 10.2x/ 7.9x in 2026/27E.For fine chemicalsand new material, we use 10.7x EV/EBITDA, when Chinese fine chemical peers aretrading at 11.3x/ 10.2x 2026/27E. For other core business, we use 9.0x EV/EBITDA,sameas the petrochemical business. prolonged inventory losses, (3) delay in ramping-up of projects in con