CICC has issued a research report maintaining an Outperform rating for Dongyue Group (00189) with a target price of HK$16.68. The report notes that refrigerant prices remain stable with an upward trend, while non-refrigerant businesses are experiencing a cyclical recovery. CICC maintains its 2026 net profit forecast of 2.694 billion yuan and introduces a new 2027 net profit forecast of 3.181 billion yuan. This corresponds to 2026/2027 P/E ratios of 6.5x and 5.4x respectively. The target price implies 47.2% upside from the current share price, representing 2026/2027 P/E multiples of 9.5x and 8.0x.
Key points from CICC's analysis include: Performance in line with market expectations: The company announced its full-year 2025 results, reporting revenue of 14.355 billion yuan (YoY +1.2%) and net profit attributable to shareholders of 1.642 billion yuan (YoY +102.5%). Segment profits were 357 million yuan for fluoropolymer materials, 2.288 billion yuan for organic silicon, -52 million yuan for refrigerants, and 358 million yuan for dichloromethane and caustic soda business (YoY -29.8%/+183.7%/-150.9%/-3.8% respectively). Other segments reported a loss of 381 million yuan, primarily due to property, machinery depreciation, and impairment charges. The results met market expectations. The company proposed a dividend of 0.3 HKD per share, representing an increased payout ratio.
Short-term refrigerant demand fluctuations, long-term logic remains solid: Recent conflicts have raised concerns about global trade and Middle East demand. As the Middle East is a key export market for Chinese air conditioners, short-term production schedules have been adjusted downward due to external factors. The analysis suggests current environmental factors are causing demand postponement rather than disappearance, noting that air conditioning demand in hot regions like the Middle East remains relatively inelastic. Pent-up demand is expected to recover quickly once the situation stabilizes. Refrigerant prices have shown stable growth since the beginning of the year, with R22/R32/R134a/R125 trading at 17,500/63,500/58,500/55,000 yuan per ton respectively as of March 20 (YTD +9.4%/+0.8%/+0.9%/+14.6%). With China's Refrigeration Expo approaching, further price increases are anticipated.
Raw material costs driving fluoropolymer price increases: According to Baichuan Yingfu data, as of March 25, PTFE (dispersible resin)/PVDF (battery grade)/FEP (molding compound)/fluororubber (FKM246) were trading at 49,000/59,000/70,500/67,000 yuan per ton respectively (YTD +21.0%/+13.5%/+8.5%/+26.4%). Despite rising prices of methanol and sulfuric acid, the company's high level of methane chloride integration ensures smooth price transmission, supporting profit expansion in non-refrigerant businesses.
Risk factors include unexpected changes in refrigerant policies and significant decline in air conditioning demand.
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