Domestic preparation industry leader, performance continues to pick up. The company's main business includes pesticide preparations and characteristic crops, in which pesticide preparations mainly include pesticides, fungicides, herbicides and plant nutrition products, while characteristic crops focus on Yunnan matrix blueberries, Hainan bird nest fruits and dragon fruits. Benefit from the continuous high prosperity of the downstream planting industry, the company's main product profit increases drive the performance to continue to pick up. 2022Q1 achieved a total operating income of 1.274 billion yuan, an increase of 4.54 over the same period last year, and a net profit of 166 million yuan, an increase of 12.16% over the same period last year.
Pesticide preparations: with the increase of industry concentration, it is expected to benefit from the prosperity of the planting industry. The company currently has a production capacity of 26,000 tons / year for pesticides, 18,000 tons / year for fungicides, 25,000 tons / year for herbicides, 11,000 tons / year for plant nutrition and 400 tons / year for auxiliaries. Affected by the increasingly stringent supervision of the industry and the increase of barriers to entry, the concentration of the preparation industry continues to increase.
According to a preliminary estimate of the size of the national agrochemical industry in 2021 by consulting firm Copyright, the company ranks first with a market share of about 4.5% in 2021. Since 2020, high global food prices have increased the demand for pesticide preparations, and product prices have risen. Although the price of crude drugs in the upstream has also risen sharply, the company, as a leader in the industry, has outstanding scale and cost advantages, and is expected to overcome the rise in the price of raw materials, so as to achieve stable growth in performance.
Vigorously developing the characteristic crop industry chain is expected to become a new profit growth point. At present, the company distributes about 10000 mu of blueberries in Yunnan, 3200 mu of bird's nest fruit and 7000 mu of dragon fruit in Hainan. Among them, dragon fruit was first harvested in 2021 and officially put into production in 2022; blueberries completed their planting base in May 2021 and were first produced in the first quarter of 2022; bird's nest fruit has now been planted and is expected to start production early next year. In the context of consumption upgrading, the demand for high-quality agricultural products is growing, there is a large gap in supply, and the profitability of products is considerable. We believe that with the mass production of several characteristic crops, it is expected to bring considerable performance increment for the company.
Implement equity incentive to demonstrate the management's confidence in the development of the company. The company issued an equity incentive plan in March 2022. 1) it is proposed to grant 6 million restricted shares to the incentive object, accounting for 0.61% of the total share capital, with a grant price of 3.18 yuan per share. 2) it is awarded to a total of 10 people, including company directors, senior managers and some core managers (including subsidiaries). 3) the lock-up period is 24 months, and the exercise conditions are as follows: based on the net profit in 2021, the growth rate of net profit from 2023 to 2025 is not less than 40%, 60%, 80%, that is, the net profit is not less than RMB 4.27, 489, 550 million.
Profit forecast and valuation: benefit from the upswing of the downstream planting industry, the company's performance continues to pick up.
We have newly introduced the forecast of the company's net profit from 2022 to 2024, which is 3.07,4.54 and 602 million yuan respectively, and the corresponding EPS is 0.31,0.46,0.61 yuan respectively. We give the company 25 times PE in 22 years, corresponding to the target price of 7.76 yuan (the last target price is 6.80 yuan, which is based on 20 times PE in 20 years, an increase of 14.17%), and upgrade to the investment rating of "better than the market".
Risk hint. Raw material prices fluctuated sharply, the planting industry was booming, and the production progress of characteristic crops was lower than expected.
