Chang Chun Petrochemical Co. Ltd.&Chang Chun Plastics Co. Ltd.

Overview Key strengths Key risks Leading global market position for some specialty chemicals. Lack of integration into base feedstock chemicals. Broad product mix and diverse end-applications with integrated production and good process technology. High volatility in product prices and margins for its commodity chemical products. Enhanced financial buffer with sustainable free operating cash flow and a prudent growth strategy. Generally limited entry barriers and intense competition for most of the group's product categories. The group's profitability could remain at the low end of our forecasts in the first half of 2023, due to deteriorating market conditions since the second half of 2022 as supply began to normalize while demand weakened. Sharply narrowing product spreads amid faster pricing erosion has squeezed

...Chang Chun group's profitability will continue to decline in 2023 but could recover moderately in 2024. The group's profitability could remain at the low end of our forecasts in the first half of 2023, due to deteriorating market conditions since the second half of 2022 as supply began to normalize while demand weakened. Sharply narrowing product spreads amid faster pricing erosion has squeezed the group's margin during the period. Weak product prices could continue to subdue the profitability of crude oil-based chemical companies in the region. However, we expect China's economic reopening to somewhat stabilize chemical prices in Asia and prevent a deeper downturn particularly from the second half of 2023. In addition, Chang Chun group's improving portfolio mix could help sustain its margins and sightly reduce exposure to the high price volatility of commodity chemicals over the next two to three years. The group's significant expansion in specialty chemicals for auto, industrial, medical,...

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