Key takeaway

The company is a leader in the polyester filament and PTA industries. To date, the company has production capacity of 8.85mn tons of polyester filament yarn, 1.40mn tons of polyester staple fiber, and 11.00mn tons of PTA. In addition, 400,000 tons of polyester filament yarn and 400,000 tons of polyester staple fiber capacity are expected to be added in 2026. The polyester filament yarn and PTA industries have relatively concentrated competitive landscapes, providing a foundation for curbing excessive competition. The industries have therefore continued to explore ways to curb excessive competition and achieved results in stages. Under the dual “anti-involution” drive in polyester filament yarn and PTA, the company’s earnings are poised for strong upside.

Event

The company released its 2026 interim report. In 1H26, revenue reached RMB40.691bn, up 21.5% YoY; net profit attributable to the parent company reached RMB1.439bn, up 103.16% YoY; and net profit attributable to the parent company excluding nonrecurring gains and losses reached RMB1.522bn, up 130.51% YoY. In 2Q26, the company recorded revenue of RMB23.161bn, up 22.33% YoY and 32.12% QoQ; net profit attributable to the parent company reached RMB1.071bn, up 166.19% YoY and 191.46% QoQ; net profit attributable to the parent company excluding non-recurring gains and losses reached RMB1.017bn, up 154.35% YoY and 101.53% QoQ.

Quick Take

Polyester filament yarn volume and prices rose in 2Q26, while PTA profitability recovered

In 2Q26, the polyester filament yarn industry implemented antiinvolution measures by operating at 75% utilization, achieving solid results. In addition, the improvement in PTA supplydemand significantly boosted the profitability of filament yarn and PTA. On the demand side, apparent domestic demand for polyester filament yarn increased 6.12% YoY in 1H26; total exports reached 1.8436mn metric tons, up 16.75% YoY, with both volume and prices trending upward. According to the quarterly operating data disclosed by the company, total filament yarn sales volume reached 3.4543mn tons in 2Q26, up 61.1% YoY and 104.1% QoQ. By product, POY sales volume was 2.2524mn tons, up 56% YoY and 108.3% QoQ, with an average price of RMB7,703/ton, up 27.1% YoY and 21.7% QoQ; FDY sales volume was 776,600 tons, up 74.2% YoY and 100.3% QoQ, with an average price of RMB8,347/ton, up 33.3% YoY and 22.1% QoQ; DTY sales volume was 425,300 tons, up 67% YoY and 90.1% QoQ, with an average price of RMB9,439/ton, up 19% YoY and 17.8% QoQ. For PTA, external sales volume reached 1.9276mn tons in 2Q26, up 224.1% YoY and 136.2% QoQ, with an average price of RMB5,673/ton, up 35.4% YoY and 16.3% QoQ.

The anti-involution model for polyester filament yarn is becoming clearer, with the normalized profitability expected to continue rising. The polyester filament yarn market is highly concentrated, with the industry's CR6 rising to 89% in 1H26. The highly concentrated competitive landscape and the significant slowdown in new capacity growth provide a solid foundation for the polyester filament yarn industry to curb excessive competition. After years of exploring ways to curb excessive competition, the industry has made solid progress in implementing such measures in 2026 and is gradually approaching a reasonable profit level. In addition, the upstream PTA industry is also adopting measures to curb excessive competition. The combined efforts in both polyester filament yarn and PTA are expected to significantly boost the company's profit, with its normalized profitability likely to rise further.

Investment recommendation: Considering the smooth implementation of anti-involution initiatives in the polyester filament and PTA industries in 2026 and the stronger-than-expected earnings recovery in the two sectors, we raise our previous forecasts. We expect the company to achieve revenue of RMB90.063bn/RMB92.402bn/RMB96.139bn in 2026 – 2028, respectively, versus the previous forecasts of RMB87.941bn/RMB90.318bn/RMB93.563bn, representing YoY growth of 25.86%/2.60%/4.04%; and net profit attributable to the parent company of RMB2.767bn/RMB3.329bn/RMB4.141bn, respectively, versus the previous forecasts of RMB1.852bn/RMB2.390bn/RMB3.243bn, representing YoY growth of 171.73%/20.29%/24.41%.

The current share price implies PE of 11.4x/9.5x/7.6x, respectively. Maintain “Buy” rating.

Risks:

(1) Unexpected fluctuations in crude oil prices: Crude oil prices are highly correlated with international political and economic conditions and are subject to significant volatility. Substantial fluctuations in crude oil prices can affect price spreads and earnings stability across the downstream industry chain, thereby impacting the company's profitability. (2) Changes in the industry competition landscape: The rapid commissioning of new polyester filament yarn capacity may lead to localized overcapacity in this product segment, intensifying industry competition and squeezing profit margins. (3) Macroeconomic fluctuations and a global economic downturn:

The downstream sectors for chemical products are numerous and widely distributed, with a high correlation to macroeconomic conditions. An economic downturn may affect demand for products in the apparel industry and other sectors. (4) Weaker-than-expected implementation of anti-involution policies: The polyester filament yarn and PTA industries are implementing anti-involution measures. Weaker-than-expected implementation would have a certain negative impact on the segments' profitability during the off-season.