Key takeaway
The company has a complete fluorochemical industry chain and is a leading player in both refrigerants and fluorinated polymer materials. Since China introduced production quotas for thirdgeneration refrigerants in 2024, their prices have continued to rise, with greater long-term upside. As a leading producer of third-generation refrigerants, the company has strong pricing power. In fluorinated polymer materials, the sector is currently at the bottom of the cycle, while products such as PVDF and PTFE have shown signs of a modest rebound, and the business climate is expected to recover. In addition, as a leader in the fluorochemical industry, the company has maintained high R&D spending for many years and established an early lead in highend fluorochemical products such as fluorinated fluids and PFA, which are expected to contribute to long-term growth.
Event
The company released its 3Q26 report. In 9M26, revenue reached RMB19.086bn, down 6.47% YoY, while net profit attributable to shareholders of the parent company reached RMB3.422bn, up 5.34% YoY. In 3Q26, revenue reached RMB5.746bn, down 18.64% YoY and 21.53% QoQ, while net profit attributable to shareholders of the parent company reached RMB771mn, down 35.58% YoY and 47.78% QoQ.
Quick Take
Refrigerant sales volume declines YoY and QoQ due to the seasonal transition and weak downstream demand, but third-generation refrigerant prices continue to rise. According to the company announcement, refrigerant revenue in 3Q26 fell 18.8% YoY and 33% QoQ. Sales volume declined 21% YoY and 30% QoQ, while the average selling price rose 2.7% YoY but fell 5% QoQ. The refrigerant segment remained the company's main earnings contributor, but sales volume declined substantially.
On the one hand, China's residential air-conditioner output has continued to decline YoY since the beginning of 2026, resulting in relatively weak direct downstream demand for refrigerants. Specifically, residential airconditioner output totaled 148mn units in 9M26, down 7.16% YoY, with domestic sales down 11.35% YoY and exports down 4.96% YoY. On the other hand, direct refrigerant exports were also relatively weak, as Group 2 A5 countries increased production to secure quotas and exports to the Middle East remained constrained.
According to customs data, export volumes of R32, R125, and R134a fell 43.27%, 33.71%, and 11.30% YoY, respectively, in 9M26. Note: R32 export volume is calculated as direct R32 exports plus 50% of R410a exports. In addition, the third quarter is typically the off-season for refrigerants in the OEM market, so refrigerant sales volume also declined QoQ. Despite weak demand, third-generation refrigerant prices continued to rise, although lower second-generation refrigerant prices weighed on the overall average. According to Baiinfo, the average tax-inclusive prices of R22, R32, R134a, and R125 in 3Q26 were RMB22,700/ton, RMB64,500/ton, RMB64,300/ton, and RMB55,000/ton, respectively. These represented YoY changes of -49.1%, +43.1%, +30.6%, and +17.3%, and QoQ changes of -7.1%, +0.4%, +5.8%, and +11.3%, respectively. The long-term rationale for rising third-generation refrigerant prices is gradually strengthening.
Fluorinated new materials revenue grows YoY, while YoY and QoQ declines in petrochemical materials and basic chemicals weigh on earnings. Among the non-refrigerant businesses, petrochemicals and basic chemicals declined substantially YoY and QoQ, weighing on the company's earnings. Revenue from fluoropolymers and fluorinated fine chemicals grew rapidly, supported by accelerating volume growth in highend products. In addition, ongoing geopolitical conflicts drove substantial price increases for raw materials such as liquid sulfur, glycerol, sulfuric acid, and sulfur, raising the company's procurement costs. Specifically, in 3Q26, revenue from fluoropolymers increased 16.6% YoY and decreased 6% QoQ; revenue from fluorinated fine chemicals increased 38.3% YoY and decreased 14% QoQ; revenue from fluorochemical raw materials increased 36.2% YoY and 20% QoQ; revenue from petrochemical materials decreased 40.4% YoY and 28% QoQ; revenue from basic chemicals decreased 20.3% YoY and 22% QoQ; and revenue from food packaging materials increased 32.4% YoY and 0.3% QoQ.
Supply coordination among refrigerant producers continues to strengthen, with substantial room for price increases over the medium to long term. The sustained medium- to long-term price uptrend in thirdgeneration refrigerants is relatively certain. On the one hand, the 2027 quota policy for third-generation refrigerants has been released and is consistent with the 2026 policy, leaving the rationale for supply coordination unchanged. On the other hand, R32 prices have continued to rise despite weak demand from residential air conditioners, indicating that producers remain firmly committed to jointly supporting prices.
Risks:
(1) Crude oil prices rise or fall beyond expectations: Crude oil prices are highly correlated with international political and economic conditions and are volatile. Significant fluctuations in crude oil prices would affect product prices, spreads, and earnings stability in the company's petrochemical and basic chemical raw materials segment, thereby affecting its profitability; (2) significant changes in the refrigerant quota policy: The quota policy currently in effect is the key driver of refrigerant price increases. Significant adjustments to the quota policy could affect market expectations for future refrigerant price increases, thereby affecting the share price;
(3) macroeconomic volatility and a global economic downturn: Fluoropolymer products serve numerous and widely distributed downstream applications and are highly correlated with macroeconomic conditions. An economic downturn could weaken demand for fluoropolymer materials and other products. (4) Air conditioner production schedules fall short of expectations: Air conditioner production schedules affect refrigerant prices. A significant decline in scheduled production would exert some pressure on refrigerant prices.