Analysis of Chemical Industry Cycle Inflection Points' Impact on A-share Chemical Sector Investment Opportunities

According to CICC’s 2026 Outlook Report, the petrochemical industry has been in a downward trend for about 3.5 years and is currently in the cycle bottom area. Typical characteristics include:

• Capacity Contraction
  : Industry capital expenditure continues to decline, and overseas outdated capacity is gradually exiting
• Supply Improvement
  : Industry self-discipline is strengthened, and “anti-involution” policies promote product profit recovery
• Demand Growth
  : Demand for new energy-related chemicals has become an important growth driver

:

• Capacity growth rate slows down, entering a low-growth phase
• Outdated capacity clearance accelerates industry concentration
• Industry self-discipline improves, reducing vicious competition

:

• Rapid development of the new energy industry drives demand for related chemicals
• Import substitution process of high-end materials accelerates
• Downstream manufacturing industry sentiment rebounds

From the performance of major chemical stocks from 2024 to 2025, the sector shows obvious internal differentiation:

• Juhua Co., Ltd. (600160.SS)
  : Total return of 116.67%, annualized volatility of 40.08%, outstanding performance
• Hengli Petrochemical Co., Ltd. (600346.SS)
  : Total return of 40.17%, annualized volatility of 29.09%, steady growth
• Wanhua Chemical Group Co., Ltd. (600309.SS)
  : Total return of -7.40%, relatively under pressure

Taking Juhua Co., Ltd. as an example, the company’s fundamentals are excellent:

• Market capitalization of 94.76 billion USD
• Current share price of USD 35.10
• P/E ratio of 23.99x, in a reasonable range
• ROE of 20.77%, strong profitability
• Net profit margin of 14.66%, good operational efficiency [0]

:

• Low valuation in the industry bottom area, high margin of safety
• Large price elasticity after supply-side improvement is confirmed
• Leading enterprises benefit first, market share concentrates

:

• Performance elasticity releases after demand recovery is confirmed
• High certainty of demand growth for new energy materials
• Industrial chain synergy effects emerge

:

1. New Energy Materials
   : Lithium battery materials, photovoltaic materials, hydrogen energy materials
2. Special Chemicals
   : Electronic chemicals, functional materials
3. Basic Chemicals
   : Sub-sectors with improved supply-demand patterns

:

• Increased proportion of high-end and differentiated products
• Enterprises with integrated industrial chain advantages
• Companies with strong technological innovation capabilities

:

• Certain opportunities of leading chemical enterprises
• Companies related to the new energy materials industrial chain
• Special chemical enterprises with technical barriers

:

• Traditional chemicals with improved supply-demand patterns
• Segments with large import substitution space
• Green chemical enterprises supported by policies

:

• Pay attention to the impact of global macroeconomic changes on demand
• Monitor the impact of crude oil price fluctuations on costs
• Prevent risks of unexpected capacity deployment

:

• Avoid blindly chasing hot topics
• Pay attention to changes in company fundamentals
• Control concentration of a single sub-industry

• Pay attention to Q1 performance forecasts and industry data
• Focus on demand-side improvement signals
• Moderately layout valuation repair opportunities

• Main uptrend opportunities after cycle inflection point is confirmed
• Certainty of sustained demand growth for new energy
• Leading enterprises benefit from industry concentration improvement

• Structural opportunities from high-quality development of the chemical industry
• Growth opportunities driven by technological innovation
• Competitive advantages of integrated industrial chains

• Chemical product price index trend
• Changes in industry capacity utilization
• Inventory destocking progress

• Degree of profitability improvement
• Changes in cash flow status
• Optimization of capital-liability structure

• Global economic recovery progress
• Crude oil price trend
• Policy support intensity for new energy

The current chemical industry is at a critical position of cycle inflection point, with the following investment values:

: After long-term adjustment, the sector’s valuation is at a relatively low historical level, with significant repair space.

: Demand growth for new energy provides a new growth engine for the industry, with strong growth certainty.

: National policy support for high-end chemicals and new materials provides a good environment for industry development.

: Industry technological upgrade and product structure optimization enhance enterprises’ long-term competitiveness.

Overall, the cycle inflection point of the chemical industry has a positive impact on investment opportunities in the A-share chemical sector. It is recommended that investors focus on leading enterprises with improved supply-demand patterns, strong technological innovation capabilities, and industrial chain advantages, and seize the investment opportunities of cycle reversal under risk control.

[0] Gilin API Data
[1] Bloomberg - “China’s Petrochemicals Boom Escalating Fears of Global Glut” (https://www.bloomberg.com/news/articles/2025-12-03/china-s-petrochemicals-boom-escalating-fears-of-global-glut)
[2] Yahoo Finance - “2026 Economic Acceleration Brings New Investment Opportunities! Goldman Sachs: These Sectors Benefit the Most” (https://hk.finance.yahoo.com/news/2026年經濟加速帶來投資新機會-高盛-這些領域-受益最大-032811787.html)
[3] Bloomberg - “Green Stocks Are Big Winners as Tech Boom Drives Energy Demand” (https://www.bloomberg.com/news/articles/2025-12-13/green-stocks-are-big-winners-as-tech-boom-drives-energy-demand)