The company achieved net profit of 1,844/123 million yuan respectively in 2022 and 2023Q1, which was +125.91%/-80.66% year-on-year respectively. Prices of the company's main products have declined, and short-term performance is under pressure. Looking at the long term, the company's multi-base layout is progressing steadily, and future growth can be expected. Considering that pesticide prices are in a downward cycle, we lowered the company's 2023-2024 profit forecast to 870/1,021 million yuan (the original forecast was 1,973/2,029 billion yuan), and added the 2025 profit forecast to 1,201 billion yuan. The corresponding EPS was 285/3.34/3.93 yuan respectively. Referring to companies comparable in the industry, the company was given 15xPE in 2023, adjusted the target price to 43 yuan, and maintained the “buy” rating.

The price of glyphosate was high, and the company's performance increased sharply year over year in 2022. In 2022, the company achieved revenue of 8.349 billion yuan, +28.76% year on year, and achieved net profit of 1,844 million yuan to the mother, +125.91% year on year. By business, the company's herbicide, insecticide and chlor-alkali business achieved revenue of 52.58/6.21/549 billion yuan respectively, +55.23%/33.87%/43.32%, respectively; the corresponding gross margin was 36.43%/30.70%/53.27%, and +9.52/-2.64/+2.71 pcts, respectively; the price of the corresponding single ton product was 5.60/3.12/0.12,000 yuan, respectively +46.01%/33.37%/41.28%, respectively. The company's main product, glyphosate, maintained a high boom in the first half of 2022, which was the main reason for the sharp increase in performance over the previous year.

Prices of main products continue to fall, and 2023Q1's performance is under pressure. 2023Q1 achieved revenue of 1,353 million yuan, or -50.25% compared to the previous year, and achieved net profit of 123/120 million yuan after deduction, which was -80.86%/-81.17%, respectively. By product, 2023Q1's herbicides, insecticides and chlor-alkali products sold 1.74/0.56/12,700 tons respectively, with a year-on-year ratio of -42.76%/-12.50%/-4.72%. The average sales price was 3.72/281/0.1 million yuan/ton, respectively, and -37.45%/-8.69%/-10.57% over the previous year. Prices of the company's main products have gradually declined from the sharp rise brought about by dual energy consumption control in September 2021 to the level before the rise. At the same time, sluggish downstream procurement also affected the company's sales in the first quarter. Currently, according to statistics from Baichuan, the price of glyphosate has fallen below 30,000 yuan/ton. We expect that with the gradual recovery of overseas purchases, glyphosate prices are expected to stop falling and rebound, leading to an improvement in the company's profits.

Multi-base layout to reinvent New Jiangshan. Since 2022, the company has been deployed at multiple bases: 1) The company plans to build JST205 and supporting products at the Zhijiang base. JST205 is a non-selective herbicide innovatively developed by the company. According to the company's announcement, its herbicidal performance is superior to the comparable pesticides glyphosate and ammonium phosphate, which is expected to be released rapidly if it is put on the market; 2) it has signed an “Investment Cooperation Intent Agreement” with the Wengfu Group to cooperate with Wengfu Group to build an integrated chemical phosphorus cycle industrial chain project in a fine chemical park outside the Weng'an Economic Development Zone to build an integrated chemical phosphorus cycle industry chain project in Nantong and the third region, excluding Nantong and Third Zhi Jiang Production base; 3) To be located in Nantong The second phase of the base construction flame retardant project plans to add an annual output of 50,000 tons of TCPP, 0.5 million tons of BDP, and supporting 25,000 tons of phosphorus oxychloride production equipment. The company has a three-base layout, the project is progressing steadily, and long-term growth can be expected.

Risk factors: risk of falling product prices; risk of fluctuations in raw material prices; construction of the company's new projects falls short of expectations.

Profit forecasting, valuation and ratings: The company's multi-base layout is progressing steadily, and we are optimistic about the future growth of its performance. Considering that pesticide prices are in a downward cycle, we lowered the company's 2023-2024 profit forecast to 870/1,021 million yuan (the original forecast was 1,973/2,029 billion yuan), and added the 2025 profit forecast to 1,210 million yuan. The corresponding EPS corresponding to EPS was 285/3.34/3.93 yuan respectively. Referring to the valuations of comparable companies in the industry, Yangnong Chemical, Basemei, and Zhongqi Co., Ltd., the corresponding average valuation in 2023 was 15x, giving the company 15xPE in 2023, corresponding to the target price of 43 yuan (original value was 74 yuan) Yuan), maintaining the “buy” rating.