Events:

Deutsche American Chemical released its annual report for 2014 and its quarterly report for 2015. The company's total revenue in 2014 was 1.229 billion yuan, an increase of 3.74% over the same period last year, and its net profit was 95.7675 million yuan, down 16.94% from the same period last year, mainly due to the decline in crude oil prices in the fourth quarter of 2014. Zhongwei Chemical Industry made a larger provision for inventory price decline, while the gross margin of isooctane products decreased.

Comments:

The loss of inventory and the investment period of Yingnong led to a decline in the company's performance for 14 years. The 14-year income growth is mainly due to the large-scale sales of agricultural products in the British Agriculture and Animal Husbandry Division of the company and the inclusion of the trusteeship operation of Puyang Zhongwei Fine Chemical Co., Ltd. into the company's consolidated statement. The company's 14-year performance decline is mainly due to: (1) Guangdong Yingnong Group Co., Ltd. lost 28.58 million yuan (87% of the company's equity) in 2014, mainly due to the fact that the company's agriculture, animal husbandry and retail were in the investment period and had not yet formed large-scale production and sales. (2) in 2014, Puyang Zhongwei Fine Chemical Co., Ltd. lost 23.07 million yuan (54% of the company's equity), mainly due to the decline in crude oil prices in the fourth quarter of 2014. Zhongwei Chemical Industry made a larger provision for inventory price decline, at the same time, the gross margin of isooctane products decreased.

The performance in the first quarter of 15 fell by 32.33%. It is expected that the operating low has passed, and the operating performance in the second quarter will be greatly improved. In the first quarter of 2015, the company's revenue was 387 million yuan, up 59.55% from the same period last year, and the net profit was 12.65 million, down 32.33% from the same period last year. The performance of Tianyuan Group, which is mainly due to the losses of Zhongwei Chemical Industry and investment, has declined. It is expected that the company has completed the calculation of inventory losses in the first quarter, and due to the gradual expansion of the price spread of isooctane in warmer weather, the company's operating results in the second quarter will be greatly improved. Premier Li Keqiang of the State Council presided over an executive meeting of the State Council on April 28 to determine measures to speed up the upgrading of refined oil quality. the first is to expand the areas where five standards of automotive gasoline and diesel are supplied from January 2016, from the original key cities in Beijing, Tianjin, Hebei, the Yangtze River Delta and the Pearl River Delta to 11 provinces and cities in the eastern region. The second is to advance the time of the five national suppliers of automotive gasoline and diesel from January 2018 to January 2017. With the implementation of the national five standards, the market demand for isooctane will break out rapidly, which will be positive for the company's isooctane.

Increase investment in Yingnong Group to build a platform business model for online and offline collaborative development. The company intends to unilaterally increase the capital of Guangdong Yingnong Group Co., Ltd., a holding subsidiary of the company, by 100 million yuan. Yingnong Group shareholders other than the company will not participate in this capital increase. After the capital increase, the registered capital of Yingnong Group increased to 200 million yuan, and the company holds a 93.5% stake in Yingnong Group. Yingnong Group should gradually build the group business model, consolidate the foundation of sustainable management and development, and build a platform business model of online and offline coordinated development. This time, the company unilaterally increased its capital to Yingnong Group to solve the operating capital needed by Yingnong Group. At the same time, the company Yingnong Group Yingnong lost 6.62 million, the rate of loss has slowed down. The company announced that it will take a 20% stake in Little Bing Huo Man, and the company will get strong help for the company in the transformation of "Internet +" with its rich Internet operation experience and resources; the company's high-end agriculture and animal husbandry is currently in the early stage of establishing a brand. with the introduction of the national food safety law, ecological food will usher in a golden stage of development, a trillion yuan in the pork market. The company's ecological pork is expected to have great room for development with the help of the operation of the Little Ice and Fire Man.

Maintain the buy rating with a target price of 17.78 yuan. On November 25 and November 27, 2014, the company reduced its holdings of 2.4 million shares and 3 million shares of Tianyuan Group in bulk transactions, respectively, with a cumulative transaction amount of 53.46 million yuan; the investment income (including capital reserve transfer income) generated after tax deduction was 10.9469 million yuan. After the reduction, the company holds 36065571 shares of Tianyuan Group, with a shareholding ratio of 7.52%. With its rich experience in Internet operation, DMC will promote the strategic transformation of the company "Internet +". The commissioning of 240000 tons of isooctane project will bring greater profits to the company, and the development of the company's agricultural and animal husbandry projects will be better. at the same time, the fall in oil prices has had a positive impact on the company. It is estimated that the company's EPS for 15-17 years will be 0.38,0.60,0.69 yuan respectively. The putting into production of isooctane and the acquisition of Little Frozen Man will bring synergistic effect, and the company's performance will usher in rapid growth. Considering that the company's ecological pork touches the net, its profitability has been greatly improved, giving the company 16 years PE25 times. Corresponding to the valuation of 15.00 yuan + 2.78 yuan to hold equity in other companies (the company holds 7.52% of Tianyuan Group and 6.94% of Oke shares for a long time, with a total market capitalization of 897 million based on the closing price on April 28, accounting for 18.33% of the market capitalization of DMC, reflecting 2.78 yuan on the share price), with a target price of 17.78 yuan, maintaining the company's "buy" investment rating.

Risk tips: 1) pork prices remain low; 2) demand growth in isooctane industry is slow.