Chanhen Chemical’s 3Q26 results:For 9M26,revenue was RMB6.35bn,+9.4%YoY;attributable net profit was RMB928mn,-3.8%YoY;recurring net profit was RMB925mn,-1.8%YoY.For 3Q26,attributable net profit was RMB368mn,-14.1%YoY/-0.9%QoQ,below our forecast of RMB390mn due to delayed phosphate exports and lower investment income from Tianyi Mining.Recurring net profit was RMB371mn for the quarter,-13.4%YoY/+1.4%QoQ.Maintain BUY,given Chanhen's clear phosphate ore volume growth and integrated phosphate chemical advantages.
Phosphate ore prices stayed high,iron phosphate jumped QoQ
1)Phosphate ore:According to Baiinfo,ASP of 30%P2O5 phosphate ore in 3Q26 was RMB1,006/tonne,-1.3%YoY/-0.5%QoQ.Prices remained high;the slight QoQ decline mainly reflected high sulphuric acid costs weighing on phosphate fertilizer operating rates and reducing phosphate ore consumption.2)Phosphate chemicals:3Q26 ASPs for wet-process phosphoric acid/industrial-grade MAP/feed-grade DCP/iron phosphate were RMB8,700/7,300/6,000/15,600 per tonne,+36%/+23%/+28%/+49%YoY and-8%/-2%/-11%/+15%QoQ.Iron phosphate rose sharply QoQ on tight supply amid rapid downstream LFP cathode capacity expansion.On the cost side,sulphuric acid ASP in 3Q26 was RMB1,714/tonne,+175%YoY/-2%QoQ;high sulphuric acid prices remained asignificant cost headwind in 3Q26.For 9M26,Chanhen’s gross margin fell 2.2ppYoY to 29.6%,and the expense ratio fell 0.8pp YoY to 8.5%.Gross margin in 3Q26 was 31.6%,-1.1pp YoY/+0.3pp QoQ,and the expense ratio was 8.6%,-0.5pp YoY/flat QoQ.
Cost pressure may persist;MT phosphate ore growth is clear
On Baiinfo data,as of 23 October,market prices for 30%P2O5 phosphate ore/wet-process phosphoric acid/industrial-grade MAP/DCP/iron phosphate were RMB997/7,870/6,160/5,024/16,300 per tonne,-0.3%/-2.4%/-4.8%/-5.6%/+1.2%vs end-3Q26.Phosphate ore held steady at high levels,while phosphoric acid and calcium salt prices edged lower.The market price for sulphuric acid was RMB1,414/tonne as of 23 October,flat vs end-3Q26.We expect the company’s cost pressure to persist.Per Chanhen’s 1H26 report,the Xiaoba phosphate mine technical upgrade is scheduled for completion by end-2026,ahead of the previous schedule,while Jigongling/Laozhaizi/Laohudong mines are expected to come onstream by end-2028/2028/2029.The company's attributable phosphate ore capacity under construction is c.5.3mtpa,the main medium-term profit driver.With industry supply-side capacity additions delayed,we expect phosphate ore sector strength to persist.
Earnings forecasts and valuation
On the assumption sulphuric acid cost pressure persists in 4Q26,we cut our 2026-2028 attributable net profit forecasts by 14%/0%/0%,bringing them to RMB1.32/1.80/1.95bn(previous:RMB1.54/1.80/1.95bn),implying EPS of RMB2.18/2.96/3.22.Based on the market-cap-weighted average 2027E P/E of 12x for comparable companies,we assign a12x 2027E P/E and derive atarget price of RMB35.52(previous:RMB45.54,based on 18x 2026E P/E vs comparable companies at 18x).BUY.
Risks:slower project progress than we expect,persistently high sulphuric acid prices,and weaker new energy demand than we expect.