2011 operating performance Review:

Chengxing shares announced its 2011 results, with operating income of 2.542 billion yuan for the whole year, an increase of 1.7% over the same period last year; operating profit of 76 million yuan, and net profit belonging to shareholders of listed companies was 50.44 million yuan, down 4.2% from the same period last year; and the income per share was slightly lower than expected. The company pays a cash dividend of 0.3 yuan (including tax) for every 10 shares for 11 years.

Front:

The integration of phosphorus and chemical industry is advancing steadily. The company has a phosphate rock mining capacity of 1.1 million tons, as well as hydropower and thermal power supply for yellow phosphorus production. The company is also speeding up the research and development of fine phosphorus chemicals and promoting chemical logistics and other projects, and the industrial chain is expected to be further improved in the future. it is expected to become a global competitive fine chemical leader.

Negative:

The company's main products are still in the doldrums. In recent years, the production capacity of downstream products of phosphorus chemical industry has been released rapidly, and the growth rate of product demand has slowed down obviously. The gross profit margin of the company's main products phosphate and yellow phosphorus products fell by 1.5% and 1.9% respectively.

Administrative and financial costs have risen sharply. The company's management expenses have increased by more than 27 million, mainly due to the shutdown loss caused by the relocation of the old factory area, but the company has reached an agreement with the Land Reserve Center of the people's Government of Jiangyin City that it will receive 413 million yuan in compensation for the relocation of the old factory area and the suspension of production. In addition, the company's financing costs have increased, resulting in a significant increase in financial expenses of about 60 million yuan in 2011.

Maitreya and Xuanwei income tax concessions end. In 2011, income tax benefits for Maitreya phosphorus Power and Xuanwei phosphorus Power both ended, raising the tax rate from 15% and 12.5% to 25%, respectively, resulting in a significant reduction in the profit contribution of the two companies.

Valuation and recommendations:

We have lowered the company's profit forecast for 2012-2013 to 0.10 yuan and 0.15 yuan. The current stock price corresponds to 85x and 59x PE from 2012 to 2013, respectively, and continues to maintain a "neutral" rating.

Risk:

1. The cost of labor, raw materials and other factors of production has risen sharply.

2. The market valuation center is downwards.