The company is a large fat chemical group controlled by China Petroleum & Chemical Corp, and its products are in short supply. The company is a subsidiary of China Petroleum & Chemical Corp, listed on the Shenzhen Stock Exchange in 1997, and its main products include urea, compound fertilizer, LNG (liquefied natural gas) and so on. In the first half of 2022, the company realized a net profit of 439 million, an increase of 110.64% over the same period last year. In 2021, the company's return net profit was 569 million, an increase of 448.61% over the same period last year. The company's main sources of revenue are natural gas supply, urea and compound fertilizer, accounting for 24.1%, 19.6% and 18.4% of revenue in 2021, respectively, and the product production and sales rate remains high.
The excess capacity of urea has been cleared one after another, and the expansion of arable land has supported the increase in demand for chemical fertilizer. Chemical fertilizer is a necessity for agriculture. among the main chemical fertilizer products, compound fertilizer accounts for the highest proportion, followed by nitrogen fertilizer, and urea is dominant in nitrogen fertilizer. In terms of urea, the excess capacity of urea has been gradually cleared in recent years. In 2021, the effective production capacity of urea in China decreased by 12.2% compared with 2017, while the utilization rate of urea capacity rose to 83.79%. In terms of compound fertilizer, the effective production capacity of compound fertilizer in China increased from 49.4 million tons to 57.38 million tons from 2017 to 2021. With the expansion of arable land, the demand for chemical fertilizer is expected to continue to increase in the future.
The "double carbon" goal drives the expansion of natural gas production, but still depends on imports. In terms of production, China's natural gas output reached 207.58 billion cubic meters in 2021, an increase of 7.84 percent over the same period last year. From 2010 to 2021, the average annual compound growth rate reached 7.28%; in terms of market share, China's natural gas production accounted for only 5.2% of the global output in 2021. By the end of 2021, China's dependence on natural gas imports has reached 45.76%. In 2020, China's coal energy consumption accounted for 56.8%, while the United States coal power generation is only 10%. Driven by the "double carbon" target, there is still a broad space for natural gas consumption growth.
The company's layout industry chain integration, a number of cooperative scientific research has been fruitful. The company has integrated the layout of the industrial chain and actively built a marketing network. In 2021, the sales volume of automotive urea exceeded 200000 tons, and the amount of LNG filling increased by 23.1 times compared with the same period last year. In cooperation with a number of scientific research institutions, the company has successfully listed Meifeng Meiya, a high-end nitro fertilizer for high-end cash crops, with fruitful scientific research results. In addition, the polymer material park that the company cooperates with Sichuan University is expected to bring new revenue growth.
Investment suggestion
Based on the fact that the company's main business is booming and the company's newly-built production capacity is gradually put into production, we expect the company's future performance to continue to grow. We expect the company's operating income in 2022, 2023, and 2024 to be 51.89, 56.48, and 6.112 billion, respectively, and its mother's net profit is 9.07, 9.86, respectively, and the corresponding EPS is 1.55, 1.68 and 1.83 yuan per share, respectively. Taking the closing price of 9.84 yuan on September 15, 2022 as the benchmark, the corresponding PE is 6.36 pick 5.84max 5.38. Cover for the first time and give a "recommended" rating.
Risk hint
Abnormal fluctuations in product prices, upgrading of safety and environmental protection policies, and repeated domestic epidemics.
