Goldman Sachs Wanhua Chemical Group (600309) Earnings Review: Early benefit of the chemical price rally in 1Q26, more to come; Buy
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Goldman Sachs maintains a Buy rating on Wanhua Chemical Group (600309.SS), raising the 12-month target price to Rmb115.0 from Rmb80.0, implying 31.1% upside from the current price of Rmb87.70. Following Middle East conflicts, Wanhua's product portfolio saw average price increases of 34%. While 1Q26 results partially reflected this trend—with revenue reaching Rmb54.05bn, up 26% year-over-year, and net profit at Rmb3.72bn, up 21%—subsequent quarters should demonstrate the impact more fully.
Goldman Sachs expects chemical prices to remain elevated based on its oil price forecasts and ongoing supply disruptions. Wanhua's ethane-based petrochemical facilities are positioned to benefit directly from naphtha shortages. Consequently, analysts raised their 2026E-2027E EPS forecasts by 24-49% and introduced a 2028E EPS estimate of Rmb8.30.
Segment performance for 1Q26 showed sequential average selling price recoveries across the board. Polyurethane sales grew 5% year-over-year, petrochemical sales increased 26%, and specialty chemicals surged 40%. The 1Q26 gross margin stood at 14.7%, while the EBIT margin reached 10.3%. Free cash flow improved significantly to Rmb1.83bn, and leverage declined to 58.5% by the end of 4Q25. The company declared a final dividend of Rmb1.25 per share. Key risks include further global economic deterioration and prolonged US tariff uncertainties.