Investment suggestion
We maintain the "prudent recommendation" rating of Sichuan Meifeng. The company's automotive urea has the advantage of scale and has incomparable advantages over other companies in terms of quality and channel. The company's future projects are involved in the field of LNG clean energy and have great potential for growth in the future.
Reasons
Vehicle urea has become a necessity for heavy trucks and passenger cars to meet the national standard. After the full implementation of the national four emission standards for diesel vehicles in 2014, automotive urea will usher in explosive growth. China's automotive urea market is concentrated in four models: heavy truck, bus, medium truck and medium bus. The SCR scheme has become the leader in the exhaust emission system because of its small changes to the engine, low requirements for oil products and outstanding economy. On the other hand, urea for vehicles is a necessity of SCR program, and the growth prospect of urea for vehicles is promising.
The advantages of vehicle urea scale and channel are outstanding. The company has 600000 tons of automotive urea production capacity, outstanding channel advantages. Technically, the company has obtained two national invention patents of nitrogen oxide reductant and participated in the national standard of automotive urea, which has great potential for growth in the future. New projects may become bright spots for future growth. The company's project in Mianyang Industrial Park is progressing smoothly, focusing on new fertilizers such as nitro compound fertilizer in the future, which is expected to be put into production in the middle of 14 years. The company is involved in the field of LNG (liquefied natural gas) clean energy and has great potential for future growth.
Natural gas supply is stable. In 2013, the natural gas supply of the company was stable and sufficient, producing a total of 823100 tons of urea. Urea output increased by 45100 tons over the same period last year, the highest in six years. The company is backed by the Sichuan Basin and is rich in natural gas resources, which provides a guarantee for the company's profit stability.
Profit forecast and valuation
We forecast that EPS will be 0.31 yuan in 2014 and profit forecast will be 0.33 yuan in 2015. Maintain prudent recommendation ratings. The current share price corresponds to 26 times of 14-year Pamp E and 24 times of 15 years. Due to the decline in the price of chemical fertilizer and the rise in the price of natural gas, we lowered the company's target price to 9.2 yuan, a reduction of 8%, corresponding to 30x and 28x respectively in 14 / 15.
Risk
Demand falls short of expectations and the valuation center moves down.
