The current situation of the company
The company announces the main operating data from January to February 2022. According to the company's preliminary accounting, from January to February 2022, the company's total operating income was 4.137 billion yuan, an increase of 86% over the same period last year, and the net profit belonging to shareholders of listed companies was 751 million yuan, an increase of 418% over the same period last year. The company's revenue and profit growth exceeded market expectations from January to February, mainly because the price of glyphosate, the company's main product, remained high and silicone prices continued to rebound.
Comment
The company entered a period of accelerated growth in 2022-23. In recent years, the scale of the company's capital expenditure has increased steadily, of which 1-3Q21's capital expenditure increased by 48.9% to 482 million yuan compared with the same period last year. Looking forward, we believe that some of the company's key projects under construction, such as the production capacity of 3000 tons of glyphosate in Ningxia and 100000 tons of industrial silicon in Yunnan (50,000 tons in the first phase) are expected to be gradually put into production within 2022. In addition, the company still has new projects such as phosphorus flame retardants, silicon carbon anodes and special organic silanes in progress. We believe that with the gradual progress of these projects, the company entered an accelerated growth period in 2022-23.
Silicone prices continue to rebound, the follow-up boom needs to be tracked. 4Q21 silicone prices fluctuated sharply, with DMC prices rising as high as 60,000 yuan / ton in October 2021 and then continuing to decline until mid-December. In 2022, thanks to inventory replenishment and strong export demand, the release of superimposed new capacity was lower than expected, and silicone prices continued to rebound. As of March 10, DMC prices had reached 39,000 yuan / ton, up 66.0% from the December low in 2021. Looking forward, we think that the follow-up price trend still needs to observe the progress of new production capacity of enterprises such as Hesheng and Dongyue.
The price of glyphosate fell slightly and profitability remained high. In 2021, under the joint influence of higher grain prices and force majeure on the supply side, the price of glyphosate rose sharply, with the highest price reaching 80,000 yuan / ton. In 2022, as the operating rate of the supply side rose, the price of glyphosate declined rationally. as of March 10, the price of glyphosate was 700,000 yuan / ton. Although the price of glyphosate has declined slightly at present, due to the simultaneous decline in the prices of raw materials such as glycine and yellow phosphorus, we judge that the profit situation of the company's glyphosate business remains at a historically high level.
Profit forecast and valuation
We basically keep our profit forecast for 2021 unchanged, and considering that glyphosate / silicone profitability is expected to remain high in 2022max in 2023, we raise our profit forecast of 16.2% to 3.05 billion yuan / 3.16 billion yuan in 2023. The current share price corresponds to the price-to-earnings ratio of 7.2pm in 2023, taking into account the increase in earnings and the recent downward valuation of the chemical sector, we keep the company's target price unchanged at 35 yuan, corresponding to the 30% upside and the 2022amp price-to-earnings ratio of 9.4 times earnings in 2023, maintaining an industry rating that outperforms.
Risk
Glyphosate demand, price decline, silicone prices down sharply, safety and environmental protection production risk.