Recently, Guosen Securities released a research report on the latest analysis of China’s adhesive industry. The main contents of the report are as follows:
1. Review and outlook of the hot melts adhesive industry in the first half of the year: the performance has lived up to expectations, and the fundamentals continue to improve.
According to the classification of Guoxin Chemicals, the organic silicon industry where adhesives are located has a +12% increase in revenue in the first half of 2020 (ranked 5th) and a 40% increase in net profit attributable to parent (ranked 4th), second only to the plastics, electronic chemicals and potash industries. Adhesives downstream construction and new energy sectors saw the fastest growth in demand in the first half of the year, with packaging and transportation sectors hardest hit by COVID-19.
2. The five basic trends of adhesive resin industry in the post-epidemic era will remain unchanged
Guosen Securities has conducted a review of the adhesive resin industry, showing that the industry is currently at a stage where gross profit margins are at a high level and keep stable. The collapse in oil prices has brought about cost-side benefits that offset the impact of the epidemic on demand. In addition, adhesive manufacturing companies have generally optimized product structure and cost control, showing that the industry's profitability in the second quarter hit a record high.
Guosen Securities judges that the adhesive industry is basically facing a good trend:
1) With favorable policies, new adhesives resin are encouraged industries;
2) The demand side has recovered, domestic substitution of high-end products has accelerated, and demand has become counter cyclical;
3) The pressure on the cost side has dropped, the low oil price has stabilized, and the expansion cycle of chemical products has historically low costs;
4) Through optimizing the product structure and increase the number of high-end products, there is room for 10% improvement in gross profit margin in the industry;
5) Industry concentration has increased, leading adhesive companies have continued to expand, and market share has continued to increase.
3. Four aspects worth paying attention to in the future demand of the adhesive industry
The domestic hot melt adhesive construction and packaging fields still occupy the main market. New energy fields such as solar backsheets, lithium batteries, and electronic consumer industries such as digital products have a small share, but the demand is growing rapidly. Guosen Securities believes that the demand side of the industry in the second half and next year will focus on the following four aspects:
1) The recovery in infrastructure real estate and auto industry;
2) The rapid development of prefabricated buildings;
3) New energy photovoltaic and wind parity tariffs exceeding expectations;
4) Demand for high-end adhesives such as 5G consumer electronics continuing to be released
In the research report, Guosen Securities reckons that it continues to be optimistic about the recovery of demand in the adhesive industry and the increase in profitability.