Incident: In the first three quarters of 2022, the company achieved operating income of 16.171 billion yuan, +4.50%; realized net profit of 2.151 billion yuan, +44.62%; realized non-attributable net profit of 1,765 million yuan, +33.67%; of these, Q3 achieved operating income of 5.056 billion yuan, year-on-year/month-on-month, -17.5%/-9.6%; realized cumulative net profit of 485 million yuan, year-on-year/-52.8%; achieved net profit of 4.48 billion yuan, year-on-year, year-on-year /The month-on-month period was 35.5%/-37.8%, respectively. In the third quarter, the company achieved gross margine/net interest rate of 14.72%/11.80%, compared to -11.7 PCT/-11.1PCT.
Prices of main products weakened, and the company accrued asset impairment. According to Baichuan Yingfu, the average market price of PVC/caustic soda, which is the main product of 2022Q3's chlor-alkali sector, was 6541/4665 yuan/ton, respectively, -30.9%/+68.3% year on year, and -23.8%/+5.7% month on month. Among them, PVC prices declined markedly, mainly due to poor demand for downstream real estate. In the agrochemical sector, the average market price of 2022Q3 diammonium phosphate/urea was 4314/2494 yuan/ton, respectively, +25.0%/-7.4%, year on year, and +13.7%/-19.7% month on month. The reason for the return in single-matter fertilizer prices was that exports were restricted while the prices of upstream raw materials sulfur and synthetic ammonia fell, and downstream stocking was cautious. In this context, the company calculated asset impairment losses of 142 million yuan in the third quarter, mainly due to preparations for reduced inventory prices. Furthermore, in the third quarter, the company withdrew transactions from Hunan Yihua and Xinyi mining, thus confirming credit revenue of 270 million yuan.
Terminal stocks of chemical fertilizers are low, and demand for spring farming is yet to be released; demand for chlor-alkali is expected to pick up as policy boosts. Due to careful preparation of agricultural materials in the third quarter, the commencement of superimposed ammonium phosphate construction was low, and channel inventories are currently low. Currently, the prices of sulfur and synthetic ammonia have rebounded at the bottom, and with the arrival of peak fertilizer seasons such as winter storage and spring farming, compounded by the suspension of winter equipment production restrictions and maintenance, it is expected that the tight balance between supply and demand will form some support for fertilizer prices. In the chlor-alkali sector, we still need to continue to pay attention to the trend of the domestic real estate market. Recently, the central government and local authorities have introduced a number of policies to stabilize real estate. Local policies adapted to local conditions, such as the “stabilizing real estate and securing delivery” level, may continue in the fourth quarter, and demand on the chlor-alkali side is expected to pick up.
The two wings of “resources+new energy” have developed, and the company has been steadily transformed and upgraded. On the resource side, the debt-for-share capital increase for the high-quality subsidiary Xinjiang Yihua was completed in September of this year, and the shareholding ratio of listed companies changed from 19.90% to 35.60%. Xinjiang Yihua has three advantages: rich upstream coal resources, regional electricity price advantages, and a complete supporting industrial chain. The company is expected to build a highly profitable chlor-alkali chemical industry chain in the west with Yihua in Xinjiang as the core. On the new energy side, construction of new energy materials projects such as iron phosphate in cooperation with the company and Ningde Times and Stanley continues to advance. It is expected that they will all be put into operation in the second half of 2023. On September 27, the company disclosed that the capital increase for Stanley Yihua had been completed, that the registered capital of Stanley Yihua had been changed from 2 million yuan to 2 billion yuan, and that Songzi Fertilizer's shareholding ratio in Stanley Yihua remained unchanged at 35%; in October, the company issued an announcement that in order to promote the comprehensive development and utilization of phosphogypsum, Songzi Fertilizer and Stanley Yihua plan to increase the capital for gold storage and environmental protection by a total of 198 million yuan in cash. After the transformation and upgrading began, the company's investment direction was mostly in the direction of new materials and new energy. As of Q3, the project under construction was 728 million yuan, and the company's second growth curve will begin in the future.
Investment suggestions: Considering the performance of the first three quarters, combined with the current position of the company's product boom, we adjusted the net profit forecast for 2022-2024 from 31.49/33.23/3.805 billion yuan to 2,606/29.49/3.70 billion yuan, corresponding to the current PE of 4.9x/4.3x/3.4x, respectively. We gave the company 8 times the target PE for 2022, corresponding to a target price of 23.20 yuan, and maintained the “strong promotion” rating.
Risk warning: Project progress falls short of expectations; international oil prices fluctuate greatly; safety and environmental policy changes.