Main points of investment:
Six countries Chemical Industry released its financial report for the third quarter of 2015. In the first three quarters of 2015, Liukuo Chemical achieved operating income of 4.826 billion yuan, + 19.30% year-on-year; net profit attributed to the parent company was 142 million yuan, + 267.91% year-on-year; earnings per share was 0.27 yuan, and the weighted average return on net assets was 6.83%. In the third quarter, the company realized operating income of 2.072 billion yuan, year-on-year + 26.26%; net profit attributed to the parent company was 88 million yuan, year-on-year + 425.07%, and earnings per share was 0.17 yuan.
The prosperity of phosphate fertilizer industry has rebounded. The reduction of tariffs is beneficial to the export of phosphate fertilizer, which has increased greatly in the past two years. The substantial increase in the export volume of phosphate fertilizer contributes to the recovery of the prosperity of China's phosphate fertilizer industry. Since 2015, the prices of major phosphate fertilizers in China have shown an upward trend. From January to August 2015, the prices of monoammonium phosphate and diammonium phosphate increased by 6.0% and 4.3% respectively.
Benefiting from the rising price of phosphate fertilizer, the company's phosphate fertilizer business is more profitable. With the improvement of the prosperity of the phosphate fertilizer industry and the strengthening of the company's internal cost control, the gross profit margin of the company's phosphate fertilizer business has been greatly improved. in the first half of 2015, the gross profit margin of the company's monoammonium and diammonium business was 12.41% and 10.34% respectively, an increase of 5.88 and 9.98 percentage points respectively over the same period last year.
The profitability of compound fertilizer is stable. The profitability of the company's compound fertilizer business is relatively stable, and the business gross profit margin is basically maintained between 7% and 10%, and the company's compound fertilizer business gross margin was 9.73% in the first half of 2015.
The company is expected to benefit from the reform of state-owned enterprises. The controlling shareholder of the company is Tonghua Group, and the actual controller is Tongling SASAC. The company issued a suspension announcement on June 4, 2015. Tonghua Group, the controlling shareholder (25.49% of the total shares in the company), is planning mixed ownership reform. As the capital operation platform of the group, the company is expected to benefit from the reform of state-owned enterprises in Tongling City.
Profit forecast and investment rating. We expect the company's EPS to be 0.40,0.36 and 0.39 yuan respectively from 2015 to 2017. According to the 2015 EPS and 25 times PE, we give the company a target price of 10.00 yuan and an "overweight" investment rating for the first time.
Risk tips: the risk of large fluctuations in product prices; the progress of state-owned enterprise reform is not up to expectations.
