EB SECURITIES: Chemical industry sector is bottoming out in the cycle, growth momentum continues.

EB SECURITIES released a research report stating that in 2026, with the continuous expectation of macroeconomic recovery and the promotion of supply-side policies, the chemical industry will see optimization in supply and demand dynamics, and profitability is expected to improve. Under the demand drive of AI, OLED, Siasun Robot & Automation, among others, the chemical new materials sector will continue to show strong growth momentum. It is recommended to focus on: (1) leading companies in sectors such as phosphorus chemicals, potassium fertilizers, pesticides, MDI, titanium dioxide, lithium battery materials with complete industrial chains and strong cost control capabilities; (2) leading companies in the fields of semiconductor materials, OLED materials, PEEK, MXD6, high-frequency high-speed resins, and liquid cooling materials with technological barriers and customer validation advantages. The main points of EB SECURITIES are as follows: Macroeconomic recovery is steady, the chemical industry is establishing a bottoming out trend Since 2025, the macro price index has been continuously improving, with the fading impact of high bases, the CPI index is expected to return to positive in 2025Q4, and the PPI index is expected to gradually narrow its year-on-year decline. The chemical product price index is expected to stabilize after falling, and the chemical industry as a whole is entering the bottoming out stage. With low inventory levels and gradual demand recovery, downstream companies are gradually replenishing stocks, and the profitability of the chemical industry is expected to bottom out and recover. At the same time, capital expenditure in the chemical industry remains restrained, the pace of new capacity investment is slowing down, which helps to improve the supply-demand relationship. On the policy side, in September 2025, the Ministry of Industry and Information Technology and other eight departments officially issued the "Stable Growth Plan for the Petrochemical Chemical Industry (2025-2026)." The plan clearly states that the value added of the petrochemical chemical industry will grow by more than 5% annually from 2025 to 2026, and specific measures are proposed from innovation, investment, demand, and openness to promote stable growth of the petrochemical chemical industry. The PB valuation of the chemical industry is at a historical low, and the profitability of cyclical industries is expected to bottom out and recover Currently, the PE valuation of the chemical industry is at a relatively high historical percentile, while the PB valuation is close to the bottom levels seen in 2019 and 2024. The PE valuation reflects the market's early pricing for future recovery during the performance bottoming period, while the PB valuation indicates that the chemical industry as a whole still has significant upside potential. Looking at sub-sectors, the agricultural chemical sector has performed relatively well, and phosphate and potassium fertilizer prices are expected to remain high, while the pesticide industry is entering the early stage of recovery with a clear trend. Although the MDI sector has low prices, leading companies maintain stable profitability through flexible control of shipping pace, demonstrating strong industry resilience. In the titanium dioxide sector, with low prices and low profitability currently prevailing, the industry has jointly issued price increase letters to support prices, with some expectation of recovery. At the same time, leading companies in the titanium dioxide sector are expanding overseas, which is expected to further enhance the industry's status and international influence. In the lithium battery materials sector, with strong demand from end users and orderly expansion by leading companies, the supply-demand dynamics for products like lithium hexafluorophosphate are finally improving, and profitability is showing an upward trend. Growth sector momentum continues, strong demand for new materials The high prosperity in emerging application areas has become a new growth engine for the basic chemical industry. End markets such as AI, OLED, Siasun Robot & Automation continue to expand, bringing strong growth momentum to the chemical new materials sector. The expansion of AI computing power and data center construction, as well as the penetration of intelligent driving, are driving the semiconductor industry's sales expansion, which in turn continues to increase demand for key materials. Core materials such as photolithography chemicals, wet electronic chemicals, and electronic special gases are in a resonance phase of "expanding demand + accelerating domestic substitution." The OLED sector also maintains high growth, with domestic panel manufacturers increasing their market share, leading to rapid growth in the OLED organic materials market size and domestication rate. Additionally, the rapid development of the humanoid Siasun Robot & Automation industry chain is bringing new demand for high-performance materials. Materials like PEEK and MXD6 have high application potential in the Siasun Robot & Automation field due to their lightweight, high-strength, and heat-resistant properties. Under the wave of AI, high-frequency high-speed resins and liquid cooling materials are also experiencing growth opportunities. Risk warning: downstream demand recovery is below expectations, fluctuation in chemical product and raw material prices, policy implementation in the industry falling short of expectations, risks of China-US trade friction, safety and environmental risks, exchange rate fluctuations.