Berun Chemical (000683 CH): 2Q26 preview: cost leadership remains key differentiator

Research evidence excerpt

Berun Chemical (000683 CH): 2Q26 preview: cost leadership remains key differentiator

Equities ● Chemicals

30 June 2026

Exhibit 1. Soda ash spreads comparison with different production processes (RMB/t)

Source: HSBC Qianhai Securities

Exhibit 2. Soda ash prices have reached the bottom since mid-2025 (RMB/t)

Valuation and risks

We use a PB-ROE methodology to value the stock based on a valuation base of 2027. Based

on the HSBC Global Investment Research global equity strategy team’s cost of equity (COE)

assumptions, we apply a risk-free rate of 4.25% and an equity premium of 4.75%. Based on the

most recent two years’ beta of 1.0, we arrive at our COE assumption at 9.0%. We assume a

terminal growth rate of 4% given the long-term growth we expect from soda ash demand.

Applying this to our 2027 ROE estimate of 18%, we derive a target PB multiple of 2.9x. Based

on our 2027 BVPS estimate of RMB3.63 (all assumptions unchanged), we arrive at our rounded

target price of RMB10.50 (unchanged), which implies c.74% upside to the current share price,

and we maintain our Buy rating.

Downside risks

◆ Erosion of cost advantage from falling raw material prices — Declines in coal and natural

gas prices for traditional soda ash producers could narrow the company’s cost advantage,

potentially keeping product prices at prolonged lower-cycle levels than our estimates.

◆ Demand risk on prolonged geopolitical conflict — Continued geopolitical tensions may

restrain macro demand, creating stagflation pressures.

◆ Tariff protection risk — As China’s share of global soda ash trade rises, excessive

exports may draw regulatory scrutiny from key importing regions and constrain China’s

export volumes and weigh on realised prices.