Event: on the evening of August 29, the company released its 2022 semi-annual report. In the first half of 2022, the company achieved revenue of 18.796 billion yuan, an increase of 24.78% over the same period last year, a net profit of 732 million yuan, an increase of 99.46% over the same period last year, and a net profit of 655 million yuan, an increase of 103.35%. 2022Q2, the company achieved revenue of 9.78 billion yuan in a single quarter, an increase of 24.16% over the same period last year, an increase of 8.47% over the same period last year, and a net profit of 304 million yuan, an increase of 39.49% over the same period last year, down 28.81% from a month earlier.

The price of plant protection products has increased significantly, and 22Q2's revenue has reached a record high. In the first half of 2022, due to the sharp rise in the price of upstream raw materials represented by crude oil, and the positive stimulus of the high price of agricultural products to the global acreage, the demand for related agrochemical products rose. Driven by both the cost side and the demand side, agrochemical products such as 2022H1 pesticide preparations have increased significantly. Although the prices of 2022Q2-related agrochemical products are lower than Q1, the overall year-on-year is still in a relatively high position in history. Against this background, 2022Q2's product prices rose 22% year-on-year, and product sales rose slightly 3% year-on-year. Benefiting from the sharp rise in the price of plant protection products compared with the same period last year, the company's 2022Q1 revenue reached a previous record high in a single quarter, while 2022Q2 revenue continued to make breakthroughs and hit new highs. 2022H1, the company's product prices rose 20% year-on-year, sales increased 8% year-on-year. In terms of product segments, 2022H1's revenue from herbicides, fungicides and fine chemical products increased significantly year-on-year, with year-on-year growth rates of 43.8%, 63.8% and 38.5%, respectively. In terms of profitability, benefiting from the slight decline in raw material prices, the company's 2022Q2 gross profit margin increased 1.08pct compared with the previous month.

The Asia-Pacific and Latin American regions performed well, while the sales of fine chemicals in China bucked the trend. 2022Q2, measured in US dollars, saw significant sales growth in the Asia-Pacific region and Latin America, up 37.3% and 39.9%, respectively, from a year earlier. The company's high year-on-year sales growth in the Asia-Pacific region is mainly due to the outstanding performance of sales in China. 2022Q2, even under the negative impact of the multi-point spread of the domestic epidemic, the sales of fine chemical products related to pesticide production in China are still outstanding, thus realizing the overall sales growth in China. 2022Q2, the company's sales in China increased by 57.2% compared with the same period last year. Sales growth in other Asia-Pacific regions is mainly due to favorable weather conditions brought about by the local La Nina phenomenon. In Latin America, the company continues to strengthen its market position in Brazil, a big agricultural country, and maintains a relatively strong demand for products while product prices are rising.

Profit forecast, valuation and rating: benefiting from the rise in the volume and price of the company's plant protection products, the company's 2022Q2 revenue reached a new high, the single-quarter profit maintained a steady year-on-year growth, and the 2022H1 performance slightly exceeded previous expectations. We have raised the company's profit forecast for 2022-2024, and it is estimated that the company's return net profit for 2022-2024 will be 11.80 (29.1%) / 13.67 (26.9%) / 15.68 (2.55%) billion respectively. We continue to be optimistic about the follow-up performance of the company as the global leader in generic pesticide preparations and maintain the company's "buy" rating.

Risk tips: fluctuations in raw materials and transportation costs, lower-than-expected downstream demand, environmental protection and production safety risks.