Galaxy Securities of China: The chemical industry is currently at a low level, waiting for the cycle to bottom out and turn upwards.

China Galaxy Securities stated that the internal performance of the chemical industry sector in Q1 25 was divergent, with the petroleum and basic chemical sectors achieving operating revenues of 1,015.1 billion yuan and 607 billion yuan respectively, representing changes of -7.1% and 6.4% year-on-year; achieving net profit attributable to shareholders of 17 billion yuan and 37.1 billion yuan respectively, representing changes of -23.5% and 4.7% year-on-year. It is expected that the decline in oil prices will continue to be the main factor dragging down the performance of the petroleum and chemical sector, while the growth in the performance of the basic chemical sector may be related to industry expansion, supply disruption leading to price hikes for certain products, and other factors. The sales gross profit margins of the petroleum and basic chemical sectors in Q1 25 were 14.3% and 17.9% respectively, at historically low levels. It is believed that the low business cycle in the chemical industry may accelerate the elimination of outdated production capacity and strengthen the industry's self-discipline. At the same time, with the continuous enhancement of domestic demand stimulus policies, the momentum of end-demand is expected to gradually stabilize, awaiting the industry's business cycle to bottom out and improve.