Event: Andamai released its semi-annual report for 2022, with operating income of 18.796 billion yuan, an increase of 24.78% over the same period last year; operating profit of 820 million yuan, a significant increase of 103.65% over the same period last year; and net profit of 732 million yuan belonging to shareholders of listed companies, an increase of 99.46% over the same period last year. Net profit after deducting non-recurring profits and losses was 655 million yuan, an increase of 103.35%. Based on the total share capital of 2.33 billion shares, diluted earnings per share is 0.31 yuan (after deduction is 0.28 yuan), and the operating cash flow per share is-0.58 yuan. Of this total, the operating income in the second quarter was 9.78 billion yuan, an increase of 24.16% over the same period last year; the net profit attributed to shareholders of listed companies was 304 million yuan, an increase of 39.49% over the same period last year; equivalent to 0.13 yuan in EPS in a single quarter.

The significant increase in pesticide product prices compared with the same period last year pushed the company's sales to a new high. In the first half of the year, the company continued its performance growth in the first quarter, driven by a 20 per cent year-on-year increase in product prices and an 8 per cent year-on-year increase in sales (in US dollars), sales reached $2.899 billion, up 24 per cent year-on-year, a record high; net profit reached $113 million, up 100 per cent year-on-year. From a product point of view, the company's revenue from herbicides / fungicides / pesticides / fine chemical products (non-agricultural) reached 88.3%, 48.2, 3.19, 1.95 billion yuan respectively, with a year-on-year change of + 43.8%, 63.8%, 30.1%, 38.5%. The company expects agricultural and energy prices to remain high in the second half of the year, supporting the prices of plant protection products to a certain extent.

The company has achieved year-on-year growth in sales in major regions of the world. From a regional point of view, sales in Europe / North America / Latin America / Asia Pacific / India, the Middle East and Africa in US dollars were 6.5G, 5.62 and US $613,000,000 respectively, while the domestic sales of yoy+7.4%/+26.1%/+37.0%/+49.1%/+2.0%, were US $449 million, maintaining high year-on-year growth (yoy+73.2%). Among them, in the Chinese region with the fastest sales growth, plant protection products have achieved a simultaneous rise in sales volume and prices, while fine chemicals have maintained strong demand; in Europe, the company has overcome the impact of the conflict between Russia and Ukraine and the adverse trend of exchange rates. to achieve continuous expansion of sales in key market countries such as France and Italy In North America, demand for the consumer and professional solutions business is strong, and the company's plant protection products cater to the agrochemical markets in the United States and Canada; Latin America benefits from strong demand supported by rising agricultural prices; the rest of the Asia-Pacific region and places such as India, the Middle East and Africa mainly benefit from favorable planting conditions.

The increase of revenue scale leads to the increase of operating costs compared with the same period last year, and the production capacity of Jingzhou base is running at a high level. In the first half of the year, the increase in sales scale led to an increase in operating costs compared with the same period last year, reflecting the rise in the company's logistics, procurement and production costs, as well as the adverse impact of exchange rate movements. The company achieved a 16% year-on-year increase in gross profit to $746 million, a year-on-year decline in gross profit 2pcts of 25.7% (in US dollars), and a total sales, management and R & D expense rate of 16.4%, down 5.6pcts from a year earlier. Total net financial expenses (financial expenses and fair value changes plus gains and losses) was 903 million yuan, an increase of 314 million yuan over the same period last year, mainly due to the higher CPI in Israel and the increase in foreign exchange hedging costs. At present, the company's Jingzhou base has completed the relocation and upgrading of production facilities, and the current production capacity is running at a high level.

Profit forecast and valuation: the company is the global leader in the generic crop protection market, taking into account the price of its main products and future production capacity, we expect the company's net profit in 2022-2024 to be 121.38-1.55 billion yuan (the previous value is 10.1-11.8-13.5), maintaining a "hold" investment rating.

Risk tips: pesticide boom is declining, product prices are falling, raw material prices fluctuate sharply, and the progress and profitability of new projects are lower than expected.