The company achieved operating income of 11.176 billion yuan in the first half of 2021, an increase of 28.17% over the previous year. The net profit of Guimo was 451 million yuan, an increase of 5.29% over the previous year, and the net profit of the mother after deduction was 4.1 billion yuan, a decrease of 0.62% over the previous year.
In the first half of the year, the company's main business operated steadily, and the scale of sugar refining business expanded. Looking back, sugar refining capacity is expected to continue to increase, and the scale of operations is expected to continue to expand. International sugar prices are driving domestic sugar prices up, the sugar price center is expected to rise, and the company's self-produced sugar business is expected to increase profits. We maintain the company's 2021-2023 EPS forecast at 0.45/0.60/0.72 yuan. Referring to the company's historical valuation situation and comparable company valuations, we gave 25 times PE in 2022, with a corresponding target price of 15 yuan, maintaining the “buy” rating.
The main business is operating steadily. In the first half of 2021, the company achieved operating income of 11.176 billion yuan, an increase of 28.17% over the previous year. The net profit of the mother was 451 million yuan, an increase of 5.29% over the previous year, and after deducting the net profit of the non-return mother was 4.1 billion yuan, a decrease of 0.62% over the previous year. The company's sugar business revenue in the first half of the year was 10.475 billion yuan. The increase was mainly due to the expansion of the scale of sugar refining business; self-produced sugar, sugar refining, and trade sugar businesses were all profitable. The company's tomato business achieved revenue of 701 million yuan in the first half of the year, and COFCO Tunhe Tomato Company, which specializes in tomato business, achieved a net profit of 86.79 million yuan.
Sugar refining capacity is expected to continue to increase, and the scale of operations is expected to continue to expand. The company's current sugar refining capacity includes the Liaoning Sugar Industry, Tangshan Sugar Industry, and Guangxi Chongzuo Sugar Sugarcane Sugar Mill's “two-step method” totaling 1.7 million tons/year. After the completion of the “two-step method” of the Beihai sugar cane sugar factory, it has a total sugar refining capacity of 1.9 million tons/year. Meanwhile, Tangshan Sugar Industry plans to build the second phase of the Caofeidian Refining Sugar Project. After completion, the company's sugar refining production capacity will be further expanded. In the first half of the year, the company expanded its sugar refining business scale and increased the operating rate of the sugar refining business. The scale effect was evident. The sugar industry in Liaoning achieved a net profit of 103 million yuan, and the subsidiaries of sugar companies that mainly trade sugar (including Caofeidian Sugar Refinery) achieved a profit of 198 million yuan.
The rise in international sugar prices has led to an increase in domestic sugar prices, and the company's self-produced sugar business is expected to increase profits. After policies were loosened and a filing system was implemented for sugar imports, the linkage between domestic and foreign sugar prices increased. Looking at the fundamentals of international raw sugar, the biggest variable now is Brazil's production situation during the current pressing season. Affected by severe droughts and continuous frosts, Brazil's production reduction is increasing. According to the latest USDA report, white sugar stocks are expected to continue to be removed, and international sugar prices are expected to continue to rise. On the domestic side, although supply is relatively relaxed, domestic and foreign sugar prices have now been inverted to support internal sugar prices. It is expected that domestic sugar prices will also rise along with the rise in international sugar prices, and the company's profits are expected to increase.
Risk factors: changes in trade policies, natural disasters such as bad weather, price increases falling short of expectations, etc.
Investment advice: The company's main business operated steadily in the first half of 2021, and the scale of the sugar refining business expanded. The capacity utilization rate in the self-produced sugar business remains high. We judge that sugar prices are currently in an upward cycle, and the sugar price center is expected to continue to rise next year and the year after. Maintain the company's 2021/2022/2023 EPS forecast at 0.45/0.60/0.72 yuan, taking into account the growth of the company's sugar refining business and the sugar price cycle. Referring to comparable company valuations, the company was given 25 times PE in 2021, with a corresponding target price of 15 yuan to maintain the “buy” rating