Performance review
1Q22 performance is in line with our expectations
The company announced 1Q22 results: revenue of 6.5 billion yuan, an increase of 72.2% over the same period last year, and net profit of 1.23 billion yuan, an increase of 340.4% over the same period last year, corresponding to 1.50 yuan per share, which is in line with our expectations. 1Q22's revenue and profits are the highest in a single quarter since going public.
1Q22 realized the sales volume of pesticide raw drug / cyclosiloxane / metal silicon 124,000 tons, and the average sales price was + 143.3%, 49.8%, 61.9% to 2.9,000, 000 yuan / ton.
Trend of development
The price of glyphosate stabilized and profits remained high. According to Baichuan Information, the price of glyphosate was 63,000 yuan / ton on April 22, an increase of 500 yuan / ton compared with April 15, ending the trend of continuous price correction since the beginning of the year. Looking forward, thanks to the slight upside of downstream demand and the gradual relief of export logistics problems caused by the epidemic, we judge that the price of glyphosate may remain relatively stable. In addition, although the cost-end glycine and yellow phosphorus prices have risen recently, the glyphosate price spread remains at a historically high level, and we judge that the company's glyphosate profit per ton is still close to 20,000 yuan.
Silicone prices continue to be under pressure, the company ploughed organosilicon terminal high value-added products. According to Baichuan Information, on April 22, the price of silicone DMC was 28,000 yuan / ton, down 26% from the year's high. Looking forward, due to the release of more silicone new capacity in 2022, we believe that it is less likely that prices will rise sharply again, but under the dual support of demand recovery and rising costs brought about by the remission of the epidemic, silicone prices may have a small chance of repair. In addition, the company has been deeply engaged in high value-added silicone terminal business in recent years, and we judge that this is expected to partially hedge against the adverse impact of silicone downside on earnings.
The scale of capital expenditure continues to increase, and the growth enters the cash period. The capital expenditure of 1Q22 reached 224 million yuan, an increase of 41.1 percent over 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, and we believe that with the gradual progress of these projects, the company's growth in 2022-23 is expected to be accelerated.
Profit forecast and valuation
Keep profit forecasts for 2022 and 2023 unchanged. The current share price corresponds to a price-to-earnings ratio of 7.2 times 2023 / 7.0 times earnings. Maintain an outperform industry rating and a list price of 35.00 yuan, corresponding to 9.3 times 2022 price-to-earnings ratio and 9.0 times 2023 price-to-earnings ratio, which has 29.1% upward space compared with the current stock price.
Risk.
Glyphosate demand, price decline, silicone prices fell sharply, production safety and environmental risks.