The results in 2011 were in line with expectations: the annual operating income of Liukuo Chemical Industry in 2011 was 3.35 billion yuan, an increase of 23.6% over the same period last year. The operating profit was 158 million yuan, and the net profit belonging to shareholders of listed companies was 133 million yuan, an increase of 63.2% over the same period last year. 26 yuan per share, in line with our expectations. The company's 11-year profit distribution plan is 1 yuan (including tax).
Positive: the price of phosphate fertilizer is high, and the company's gross profit margin of phosphate fertilizer is greatly increased. Due to the firm price and increased demand in the international chemical fertilizer market in the past 11 years, the domestic price of phosphate fertilizer has also increased significantly compared with the previous year. The average selling price of DAP and MAP in 11 years increased by more than 10% compared with the previous year. Gross margins on the company's DAP and MAP products rose 5.8 per cent and 1.7 per cent, respectively.
The self-sufficiency rate of raw materials will be further improved. The company's Susong Mining 800000 tons / year phosphate rock project has been put into production, while the 280000 tons of synthetic ammonia project is expected to reach production in September 12, which will achieve complete self-sufficiency of liquid ammonia. The further improvement of the degree of mineral and fertilizer integration of the company will ensure the full competitiveness of the company's products.
The completion of the acquisition is expected to quickly improve the performance of the company. The completion of the acquisition of Guixi in Jiangxi Province will help the company to redouble its economies of scale and market synergy, and is expected to greatly increase the company's performance.
Negative: further tightening of fertilizer export policy in 2012 may have a negative impact on the company's product exports.
With the rapid expansion of the company's production capacity, the supply pressure of phosphate rock, coal and other raw materials needed for production may increase.
Valuation and suggestion: we keep the company's profit forecast for 2012-2013 unchanged. The current stock price is 30x and 27x respectively for 2012-2013 PE, maintaining a "neutral" rating.
Risks: 1, poor integration in Guixi, Jiangxi; 2, weakening demand for chemical fertilizer caused by weather; 3, further tightening of phosphate and compound fertilizer export policy; 4, downside risk of market valuation center.
