Investment highlight
Cover Andomai (000553) for the first time to give an outperform industry rating, with a target price of 14.15 yuan, corresponding to 1.5 times city-to-book ratio and 27.2 times price-earnings ratio in 2022. The reasons are as follows:
The company is the world's largest supplier of non-patented plant protection products, and the company is an important part of Syngenta Group. Andamai and Syngenta plant protection cooperate in product stratification, raw drug synthesis, preparation production, sales channels, product mix and supply chain. We believe that Andamai and Syngenta plant protection "1x 1 > 2" is expected to form a unique competitive advantage and enhance the group's global market coverage. It will have a positive impact on the company's future sales and profits.
The global prices of agricultural products and crude oil are high, which is good for pesticide demand. The company's pesticide preparation prices rose 14% and 18% respectively in 4Q21 and 1Q22 compared with the same period last year. Considering the high global crude oil and grain prices, we believe that the global plant protection industry is in an upward cycle in 2022, global pesticide preparation prices are expected to maintain a high level, and the company's performance is expected to reverse.
Andormai business vertically runs through the whole industry chain of generic pesticides. The company has sales channels all over the world and continues to distribute emerging markets. The company has rich registration resources around the world to provide diversified and differentiated product supply. The company establishes a global supply chain system of "based on China and connecting the world". These three build up the company's important competitiveness in the field of non-patent pesticides and make the company have a strong competitive advantage in the global market.
What is the biggest difference between us and the market? The market thinks that the market barrier of non-patent pesticide is low, and it is difficult to establish competitive advantage, but it has no consciousness of differentiated preparation compounding ability and high barrier of global sales channel. We believe that Andormai's differentiated preparation compounding ability to build a strong technical moat can effectively meet the needs of farmers. The company builds localized sales channels around the world to increase its market share.
Potential catalysts: global food prices remain high, the global agrochemical cycle is upward, and the prices of pesticide products are rising.
Profit forecast and valuation
We estimate that the EPS of the company in 2022 and 2023 will be 0.52 yuan / 0.66 yuan respectively, and the CAGR will be 207%.
The current share price corresponds to 2022, the market-to-net ratio in 2023 is 1.2x1.2x, and the price-to-earnings ratio in 2022 and 2023 is 22.3x17.7x. For the first time, the "outperform industry" rating is given, with a target price of 14.15 yuan, corresponding to a price-to-book ratio of 1.51,1.4x in 2022-2023, a price-to-earnings ratio of 21.4x and 21.1% upside in 2022-2023.
Risk
Large exchange rate fluctuations and derivatives risks. Goodwill impairment risk. The price of crude drug fluctuates greatly. The recovery of the global agrochemical industry was less than expected. Risks of safety and environmental protection.
