Event: the company released its annual report for 2013. the annual operating income and net profit were 5.768 billion yuan and 170 million yuan respectively, down 11.35% and 43.57% respectively over the same period last year, and earnings per share were 0.29 yuan. The performance was lower than we expected.
Automotive urea started smoothly, and the traditional urea business has declined. In 2013, the income of the chemical fertilizer manufacturing industry reached 1.98 billion yuan, down 6.38% from the same period last year. Among them, the income of urea reached 1.46 billion yuan, down 12.16% from the same period last year, and the performance declined significantly, mainly because the urea market was in the doldrums throughout the year and prices continued to decline. The income of compound fertilizer reached 465 million, up 2.83% from the same period last year. Automotive urea achieved an income of 54.32 million yuan, and the business started smoothly. Revenue from trade and other businesses reached 3.78 billion yuan, down 13.49 percent from the same period last year.
The gross profit margin has declined and the three rates are stable. In 2013, the company's gross profit margin was 6.93%, down 2.08 percentage points from the same period last year. The main reason is that the urea market is sluggish, and the sales price continues to fall while the natural gas cost price rises, resulting in a 7.91 percentage point drop in the gross profit margin of urea this year compared with the previous year to 23.64%. The third rate is 4.87%, an increase of 1.2% over the same period last year. On the one hand, due to the adjustment of the marketing mode of some products and the adoption of delivery prices, freight costs and sales costs have increased. On the other hand, the daily repair expenses of fixed assets are directly recorded in the current profit and loss management expenses when they occur.
The business prospect of automotive urea and LNG is broad, and the transformation of industrial structure is just around the corner. In 2013, the company gave full play to its industrial advantages, effectively accelerated the pace of upgrading the industrial structure, built the first domestic urea production line with an annual output of 600000 tons with Meifeng patented technology, and jointly invested with China Petroleum & Chemical Sichuan Natural Gas Co., Ltd. to set up Sichuan Shuangrui Energy Co., Ltd., actively transformed into automotive urea and LNG business. And determine its production and sales as the long-term strategic goal of the future development of the company. With the full implementation of IV emission standards for atmospheric diesel vehicles and the increasing demand for natural gas, the market demand for vehicle urea and LNG business will usher in rapid growth. At that time, the company is expected to transform into an energy and environmental protection company, and its performance growth is more certain.
Performance forecasting and valuation. It is estimated that the company's earnings per share from 2014 to 2016 will be 0.462 yuan, 0.707 yuan and 0.872 yuan respectively, and the corresponding dynamic PE will be 17.46,11.40,9.24 times respectively. We are firmly optimistic about the growth of the company and maintain the "overweight" rating.
Risk hint: the extension of automotive urea is lower than expected; the progress of LNG project is lower than expected.
