Debate Over ChemChina Shares: Fund Manager Buys, Insurance Sells

In the second quarter, Xie Zhiyu chose to increase his holdings in Juhua Shares, and at the same time, two other fund managers from Xingquan Fund, Chen Yu and Qian Xin, also placed it among their top ten heavy positions. However, the Social Security Fund and China Life Insurance reduced their holdings. This is also the second consecutive quarter that China Life's products have reduced their holdings in Juhua Shares, why do institutions have different opinions on Juhua Shares?

Xie Zhiyu moves forward, while China Life moves backward.

On August 22, Juhua Shares announced its semi-annual report. In the first half of the year, the company achieved a revenue of 12.08 billion yuan, a year-on-year increase of 19.65%, and a net profit attributable to the parent company of 834.2 million yuan, a year-on-year increase of 70.31%.

When the performance was announced, the changes in the shareholders of Juhua Shares were also revealed. Specifically, after Xie Zhiyu, the star fund manager of Xingquan, reduced his holdings in the company in the first quarter, he increased his holdings by 7.93 million shares in the second quarter; at the same time, fund managers Chen Yu and Qian Xin of Xingquan Fund also "took action" on Juhua Shares; in addition, many public funds also joined the ranks of "hugging" the company.

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However, while public funds are rushing to increase their holdings, the Social Security Fund and China Life Insurance have reduced their holdings in Juhua Shares.

Looking at Juhua Shares, the company has achieved "beautiful" performance due to its own expansion and the upward trend of the refrigerant industry, which has also attracted many institutions to "stop by" to a certain extent. However, the underlying logic of the refrigerant industry's good performance is originally closely "bound" to the quota policy; and currently, there are negative rumors about the quota policy, which has led to different opinions among various large funds on Juhua Shares.

Xie Zhiyu now increases his holdings significantly.

Juhua Shares have been increased by Xingquan's Xie Zhiyu.

The semi-annual report disclosed by Juhua Shares shows that Xie Zhiyu's Xingquan Hechun Mixed increased his holdings in the company by 7.93 million shares in the second quarter. As of the end of the first half of the year, Xingquan Hechun held a total of 27.108 million shares of the company, with a holding ratio of 1%, making it the fourth largest shareholder of the company.

Looking back, Juhua Shares received Xie Zhiyu's favor as early as the first quarter of 2023. At that time, Xingquan Hechun newly entered 22.495 million shares, becoming the public fund product with the most shares of the company. In that quarter, the fluctuation range of Juhua Shares' secondary market stock price was 15.38-19.47 yuan.Afterward, Juhua Shares once plummeted significantly to around 13 yuan and continued to consolidate within the range of 13 to 17 yuan. Amidst the low-level oscillations, Xie Zhiyu continued to make strategic deployments; in the second and third quarters of 2023, Xingquan He Run accumulated an additional 11.564 million shares.

As time progressed into the fourth quarter of 2023, Xingquan He Run slightly reduced its holdings in Juhua Shares by 2.051 million shares; at this point, Xingquan He Run held 32.008 million shares of the company. According to the closing price of 16.49 yuan at the end of 2023, the market value of Xingquan He Run's shares reached 528 million yuan.

Entering 2024, Juhua Shares experienced a period of "glory"; in the first quarter, the company's stock price soared by more than 40%, reaching a peak of 24.24 yuan during this period.

As the stock price was strong, Xingquan He Run also made substantial profits. At this time, Xie Zhiyu chose to reduce his position at a high level, selling 40% of his holdings; by the end of March, Xingquan He Run had reduced its holdings in Juhua Shares by 12.83 million shares, bringing the number of shares held down to 19.179 million.

It is worth mentioning that since Xie Zhiyu bought back in again in the second quarter, the upward momentum of Juhua Shares has become increasingly slower. Starting from July, Juhua Shares even weakened further.

Based on the closing price of Juhua Shares on August 23 at 17.68 yuan, the stock price has fallen by about 25% compared to the end of the second quarter, a drop of 10% compared to the lowest point of the second quarter, and a retreat of over 30% compared to the highest point of the second quarter.

Assuming that Xingquan He Run still maintains its current holdings of 27.108 million shares in Juhua Shares, its latest market value of shares would be 479 million yuan, which would be a reduction of 175 million yuan compared to the market value of shares at the end of the second quarter, which was 654 million yuan.

Therefore, if Xie Zhiyu did not "sell off" his shares in the early third quarter, Xingquan He Run may have already suffered certain losses.

Public funds to the left, social security and China Life to the right

It is worth mentioning that other Xingquan fund managers, apart from Xie Zhiyu, also seem to have a strong interest in Juhua Shares.In the second quarter, three funds managed by colleagues Xie Zhiyu and Chen Yu, Xingquan Hexing Mixed and Xingquan Jingxuan Mixed, as well as the Xingquan Organic Growth fund managed by Qian Xin, also joined the ranks of increasing their holdings in Juhua Shares.

Specifically, Juhua Shares received an additional 456,200 shares from Xingquan Hexing Mixed, bringing the total to 6,626,100 shares, and an additional 336,400 shares from Xingquan Jingxuan Mixed, bringing the total to 4,487,100 shares. Meanwhile, Xingquan Organic Growth included the company in its top ten heavy-weight stock list for the first time, holding a total of 1.6 million shares, which accounts for 2.67% of the net value.

Looking further, it appears that Juhua Shares may have become the "darling" of public funds in the second quarter.

Star public funds took the lead. For instance, Chen Hao, a fund manager at Yifangda with a management scale of nearly 30 billion, along with his seven fund products, all increased their holdings in the company; Qu Yang, a "veteran" at Qianhai Kaiyuan with a management scale of 18.79 billion, managed the Qianhai Kaiyuan China Rare Assets and Qianhai Kaiyuan National Comparative Advantage funds, which both newly added the company to their top ten heavy-weight stock lists, holding 8.1593 million and 7.1808 million shares respectively during the period.

In addition, products under BlackRock Fund, such as BlackRock China New Horizons, BlackRock Advanced Manufacturing, and BlackRock Hong Kong Stock Connect Outlook, as well as products under Cinda AoYa Fund, such as Cinda Small and Medium Cap, Cinda Industry Selection One Year, and Cinda Industry Upgrade, and products under ICBC Fund, such as ICBC New Energy Vehicles and ICBC State-owned Enterprise Reform, all "en masse" added Juhua Shares to their top ten heavy-weight stock lists.

According to Choice data statistics, as of the end of the second quarter, a total of 90 funds held shares in Juhua, with a total holding of 140 million shares, a total market value of 3.371 billion yuan, and accounting for 5.17% of the circulating shares.

However, in stark contrast to the operations of public funds, the Social Security Fund and China Life reduced their holdings in Juhua Shares in the second quarter.

Looking at the company's shareholder list, the Social Security Fund 601 combination sold 1.5 million shares, reducing its holdings to 16.486 million shares by the end of the period; while China Life's ordinary insurance product reduced its holdings by 4.55 million shares to 12.85 million shares, which is also the second consecutive quarter of reducing its holdings.

Why the "debate" on Juhua Shares?

On one side is the "support" of public funds, and on the other side is the "exit" of social security and China Life. Behind these two completely different operations, it may reflect the market's divergence on Juhua Shares.Data indicates that Juhua Co., Ltd. is a leading company in China's fluorochemical industry and is also a top player in the refrigerant market. Currently, the company's second-generation refrigerant production quota and domestic production quota account for 26.3% and 31.55% respectively, while the third-generation refrigerant production quota is close to 40%.

Looking back at the past six months, there has been a scarcity of prosperous benchmark stocks in the A-share market; among the few with high performance elasticity, Juhua Co., Ltd. is included.

In the first half of 2024, Juhua Co., Ltd. achieved a revenue of 12.08 billion yuan, a year-on-year increase of 19.65%, and achieved a total profit and net profit attributable to the parent company of 1.054 billion yuan and 834.2 million yuan, respectively, with a significant year-on-year increase of 88.26% and 70.31%.

Breaking it down, in the first half of the year, the company's petrochemical material business achieved a revenue increase of 64.09% year-on-year, reaching 1.99 billion yuan, due to a significant increase in sales volume, while the revenue growth rate of fluoropolymer materials, food packaging materials, basic chemical products, and other businesses all declined year-on-year.

Importantly, the average price of Juhua Co., Ltd.'s refrigerant products increased by 22.05% year-on-year, and the export volume increased by 11.91% year-on-year, leading to a significant year-on-year increase of 36.59% in refrigerant business revenue, which is the core driving force behind the impressive performance.

The outstanding performance of the refrigerant business is inseparable from the dual support of Juhua Co., Ltd.'s own expansion and the prosperity of the industry.

It is understood that the production and sales of refrigerants by Juhua Co., Ltd. are mainly carried out by its controlling subsidiary factory company and global fluorine company, wholly-owned subsidiary Lanxi Fluorine and Quhua Fluorine, and controlling subsidiary Jusheng Fluorine. On December 5, 2023, the company announced the acquisition of about 54.696 million shares held by some old shareholders of Feiyuan Chemical, accounting for 51% of the equity, further extending its refrigerant asset coverage.

In the first half of the year, Feiyuan Chemical, acquired by Juhua Co., Ltd., was officially included in the financial statements. According to Juhua Co., Ltd.'s semi-annual report, Feiyuan Chemical achieved a net profit of 166 million yuan from January to June, a year-on-year increase of 589.8%, and the company's profit and loss within the period under long-term equity investment was 173 million yuan.

From an industry perspective, the supply of both the second-generation and third-generation refrigerants is constrained by the implementation of quota production. It is understood that the total quota for domestic second-generation refrigerants has been reduced to 49.9% of the 2009-2010 level in 2024, and according to the Montreal Protocol, it will be further reduced to 67.5% by 2025; moreover, the quota for third-generation refrigerants was officially frozen in 2024.

On the other hand, the downstream demand for refrigerants is good. Data shows that the cumulative sales volume of domestic air conditioners increased by 15.5% year-on-year in the first half of the year, and the production and sales of passenger cars completed a year-on-year growth of 5.4% and 6.3%, respectively.Therefore, under the actual fluctuation of supply and demand, the refrigerant industry has entered a prosperous cycle, driving the continuous increase in prices of related sub-segment refrigerant products. According to the statistics of Guoxin Securities, as of June 30th, among the sub-segment refrigerant products, the price of R22 reached 29,500 yuan/ton, a 55.26% increase from the beginning of the year, and the price of R32 was 35,500 yuan/ton, a 119.40% surge from the beginning of the year.

As the refrigerant industry is thriving, some "negative rumors" have also emerged for Juxin Shares. Recently, there have been frequent reports about changes in the refrigerant quota policy. Assuming that this rumor eventually turns out to be true, it will bring new disturbances to the upward trend of this round of refrigerant prosperity, that is, the constraint situation of capacity concentration towards leading companies is in doubt.

In response to this situation, Juxin Shares did not give a positive explanation, but only stated, "If it involves policy changes, it should be based on the policies announced by the competent authorities." As a "peer" of Juxin Shares, Sanmei Shares pointed out that "the price of refrigerants is affected by market quotas, upstream raw material prices, downstream market demand and other factors, and the product price has uncertainty."

In this way, it is a fact that the performance of Juxin Shares and the current prosperity of refrigerants are good, but the underlying logic of the industry's good trend is very "dependent" on quota changes. Looking to the future, the "answer" to the quota policy is still waiting to be "unveiled". Between one and the other, the market thus generates a "heated debate" about Juxin Shares.