BOCI released a research report stating that considering the current industry expansion cycle is nearing its end, measures such as the "dual carbon" goals and "anti-involution" policies are expected to catalyze a bottoming out and recovery in sector profitability. Concurrently, new materials are benefiting from the rapid development of downstream demand and are poised to enter a new phase of robust growth. In the long term, the global market share and competitiveness of the chemical industry chain continue to improve. The firm maintains an "Outperform" rating on the sector.
Medium to long-term recommended investment themes:
1. Against the backdrop of persistent geopolitical conflicts, oil prices are expected to remain at medium-to-high levels. High-quality petrochemical and coal chemical assets are likely to undergo a value re-rating.
2. The chemical industry's global market share and competitiveness are steadily increasing. Industry leaders demonstrate resilient operations, expand into new materials and other fields, and enhance their competitive capabilities against the trend. Against the backdrop of improving industry sentiment, they are expected to see both earnings and valuation multiples improve.
3. Continuous catalysts from policies like "dual carbon" and "anti-involution." Focus on sub-sectors with continuously improving supply-demand dynamics, including refining, polyester, dyes, organic silicon, pesticides, refrigerants, and phosphorus chemicals.
4. Rapid development in downstream industries, offering broad growth space for companies in the new materials sector.
BOCI's main views are as follows:
Basic Chemicals Sector Sees Year-on-Year Growth in Revenue and Profit for Q1 2026
In Q1 2026, the basic chemicals sector achieved total operating revenue of RMB 605.851 billion, a year-on-year increase of 9.26%. Net profit attributable to shareholders reached RMB 39.285 billion, a year-on-year increase of 13.41%. The sector's gross profit margin and net profit margin were 17.15% and 6.88% respectively, up by 0.55 and 0.40 percentage points compared to Q1 2025.
Most Basic Chemical Sub-sectors Report Year-on-Year Revenue Growth
Among 33 basic chemical sub-sectors, 29 achieved positive year-on-year revenue growth in Q1 2026 compared to Q1 2025. Thirteen of these sub-sectors saw growth exceeding 10%. The potash fertilizer, polyurethane, and fluorine chemical sub-sectors led in revenue growth, with year-on-year increases of 70.80%, 24.69%, and 23.06%, respectively. Revenue declined year-on-year in the remaining four sub-sectors, with nylon and soda ash leading the declines, down 9.91% and 4.40% respectively.
Significant Improvement in Net Profit for Sub-sectors Like Viscose, Membrane Materials, and Potash Fertilizer
Among the 33 sub-sectors, 20 reported year-on-year growth in net profit attributable to shareholders in Q1 2026. The viscose, membrane materials, potash fertilizer, nitrogen fertilizer, and textile chemical products sub-sectors led with year-on-year profit increases of 809.82%, 275.17%, 122.75%, 76.13%, and 71.06%, respectively. Thirteen sub-sectors saw a year-on-year decline in net profit, with nylon, carbon black, other rubber products, titanium dioxide, and inorganic salts leading the declines, down 83.88%, 72.36%, 64.74%, 62.08%, and 49.27% respectively.
Sub-sectors achieving both year-on-year revenue and net profit growth in Q1 2026 include: potash fertilizer, polyurethane, fluorine chemicals, textile chemical products, membrane materials, compound fertilizers, polyester, viscose, other plastic products, adhesives & tapes, rubber additives, civil explosive products, other chemical fibers, spandex, pesticides, coal chemicals, modified plastics, nitrogen fertilizer, other chemical raw materials, phosphate fertilizer & phosphorus chemicals.
Basic Chemicals Sector's Construction in Progress Continues Year-on-Year Decline at End-Q1 2026
At the end of Q1 2026, the basic chemicals sector's construction in progress stood at RMB 306.582 billion, a year-on-year decrease of 15.15%. Among the 33 sub-sectors, those with significant year-on-year growth in construction in progress for Q1 2026 were soda ash (+56.57%) and carbon black (+46.07%). Sub-sectors with significant year-on-year declines were other rubber products (-69.47%) and other plastic products (-65.04%). The sector's fixed assets amounted to RMB 1,509.002 billion at the end of Q1 2026, a year-on-year increase of 11.46%, with the growth rate continuing to decelerate.
Oil & Petrochemicals Sector Sees Slight Revenue Decline but Profit Improvement in Q1 2026
In Q1 2026, the oil and petrochemicals sector achieved total operating revenue of RMB 1,878.224 billion, a year-on-year decrease of 2.86%. Net profit attributable to shareholders was RMB 120.181 billion, a year-on-year increase of 14.57%. The sector's gross profit margin and net profit margin were 22.19% and 6.98% respectively, up by 2.96 and 1.22 percentage points compared to Q1 2025. The sector's ROE (diluted) for Q1 2026 was 3.15%, an increase of 0.33 percentage points from Q1 2025.
Oil & Petrochemicals Sector's Construction in Progress Declines Year-on-Year
As of the end of Q1 2026, the oil and petrochemicals sector's construction in progress was RMB 708.448 billion, a decrease of 4.28% compared to the end of Q1 2025. At the end of Q1 2026, the construction in progress for
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