Summary of the report:
From the endogenous practice transformation, equity incentives to add wings, the future development can be expected. In the past, the company mainly focused on solving inter-industry competition and relocating technical transformation to practice its own internal skills, and its development was relatively conservative. After the termination of the reorganization, the two shareholders solved the problem of inter-industry competition through reduction and share transfer, the company sought new growth, senior executives collectively increased their holdings and implemented large-scale equity incentives of 3% of the upper limit of the principle of state-owned enterprises, which fully reflected the development confidence. Zhijiang second production base successfully landed, the third venture ushered in new opportunities.
The product structure of P/Cl is gradually enriched, and the growth is driven by pesticides and new materials. The company has formed the "31st" industrial development orientation of pesticide raw drugs, pesticide preparations and new chemical materials, as well as chlor-alkali and thermoelectric industries. The industry pattern of glyphosate is improving in the future, and the upward movement of the price center is expected to create more stable profits; the leading effect of amide herbicides is obvious, and the advanced technology and strategic cooperation is expected to expand the market share and grasp the pricing power through the cost advantage; pesticides benefit from deep market ploughing and cost control, the profitability continues to improve; the national layout of the preparation platform is gradually improved, and the intelligent + sinking terminal market completes the strong chain + extended chain. Flame retardants are put into production to create new materials business, which continues the cost and technical advantages of P/Cl key raw materials. In addition, chlor-alkali thermoelectric utilities will rely on Jiangneng to exert greater benefits. The products are gradually enriched and the ability of superimposed cost control is outstanding, and the profit of the company is determined to rise to a higher level.
Chuangchuang pharmaceutical market has great potential, and the company is expected to meet the double improvement of profit and valuation. The company's patented herbicide JS-T205 (formerly SY-1604) won the Syngenta Group China "seeking plum" award, reflecting the high recognition of the industry, and the company has exclusive patents and production rights for its products. The effect of JS-T205 field trial is outstanding, and the effect of compounding with glyphosate is more obvious. we believe that JS-T205 is expected to become a new popular style of extinct herbicides after glyphosate and glyphosate, create huge profits for the company, and improve the company's valuation through successful promotion.
Maintain earnings forecasts and maintain "buy" ratings. The company's performance in the first quarter of 2022 greatly exceeded expectations, the product structure was gradually enriched in the future, the proportion of single products gradually decreased, and the cycle tended to weaken. We believe that the company is expected to replicate the development path of Yangnong Chemical after 2016, create the landing of pharmaceutical projects and the continuous expansion of new projects and new bases, and usher in Davis' double-click on enterprise value. It is estimated that the company's operating income from 2022 to 2024 will be 93.58,97.71,10.614 billion yuan respectively, and its net profit will be 19.41,20.62,2.356 billion yuan respectively, corresponding to a PE of 10X/9X/8X, maintaining the "buy" rating. Considering the growth motivation after the completion of the large-scale incentive, as well as the expectation of the new product, it is suggested that the company should be given 15 times PE with a target market capitalization of 29.1 billion.
Risk tips: product prices drop, project launch is not as expected
