The company released the 2022 report and the first quarter report of 2023. The revenue for 2022 was 4,535 billion yuan, an increase of 22.60% over the previous year, and the net profit of Gumo was 460 million yuan, an increase of 2.28% over the previous year, after deducting net profit of 449 million yuan from non-Gumo, an increase of 6.15% over the previous year. In addition, revenue for the first quarter of 2023 was 1,230 million yuan, an increase of 2.51% over the previous year, the net profit of Guimu was 152 million yuan, an increase of 6.69% over the previous year, after deducting net profit of 149 million yuan, an increase of 7.41% over the previous year. First-quarter results exceeded expectations.
The pesticide boom declined, and the company's performance showed resilience. Since the second half of last year, pesticide prices have not performed well due to weakening demand. According to Zhongnong Lihua and Baichuan, the average prices of the insecticides imidacloprid, acetamidine, methotrexate, thiamethoxam, and butylurea in the first quarter were 12.29 (YoY -34.24%, QoQ -16.16%), 10.74 (YoY -41.82%, QoQ -20.90%), 70.92 (YoY -35.26%, QoQ -9.97%), 11.91 (YoY -10.93%, QoQ -6.91%), 10.75 (YoY -10.93%, QoQ -6.91%), 10.75 (YoY -16.82%) QoQ -6.33%), 13.25 (YoY -15.56%, QoQ -4.20%) 10,000 yuan/ton; the average prices of pyrazole ester, phenyl ether meconazole, and proconazole in the disinfectants in the first quarter were 15.68 (YoY -20.14%, QoQ -8.45%), 26.25 (YoY +1.41%, QoQ -10.83%), 16.68 (YoY -20.30%, QoQ -7.83%) 10,000 yuan/ton, respectively. In the context of falling pesticide prices, the company achieved year-on-year growth in the first quarter mainly due to increased contributions. In the first quarter of 2023, the company's pesticide production increased 31.16%, 37.53%, sales increased 18.45%, and 98.01%. At the same time, the gross profit margin for the first quarter was 33.39%, an increase of 3.98 pct over the previous year and an increase of 10.97 pct over the previous quarter, showing strong profit stability.
Prothioconazole was successfully put into operation, and the expansion of production capacity contributed to the increase in performance. Shandong Hailier, a wholly-owned subsidiary of the company, officially entered the trial production stage in December 2022 for the 3,000-ton prothioconazole original drug project. If the project is fully put into operation, Shandong Hailir's design production capacity for prothioconazole will reach 5,000 tons. In addition, the company's Hengning Phase II project is also under construction, which includes a production capacity of 8,000 tons of prothiobazole. It is expected that the company's prothiobazole production capacity will reach 13,000 tons in the future. Prothioconazole will become one of the company's core products and further enhance the company's market competitiveness and profitability.
Adjust profit forecasts to “increase holdings” ratings. The company's revenue for 2023-2025 is estimated to be 5.752 billion, 72.36 billion yuan, and 8.102 billion yuan respectively (previously 6.296 billion yuan, 8.098 billion yuan, an increase of 8.102 billion yuan in 2025), and net profit of the mother is 557, 683, and 855 million yuan respectively (previously 775 million yuan and 881 million yuan, an increase of 855 million yuan in 2025). The corresponding PE is 12X/10X/8X, adjusted to the “increase in holdings” rating, respectively.
Risk warning: falling product prices, production capacity falling short of expectations