Main points of investment:
The company released its annual results KuaiBao in 2017, with revenue of 12.322 billion yuan, an increase of 110.99% over the same period last year, and net profit of 429 million yuan, an increase of 146.13% over the same period last year, which is basically in line with market expectations. The rapid growth in revenue and net profit was mainly due to the increase in the company's market share, the smooth expansion of Huifeng petrochemical's trading business and the investment income generated by the disposal of long-term equity investments in the first quarter. In the fourth quarter of 2017, the revenue was 3.383 billion yuan (YoY+39.0%,QoQ+17.1%) and the net profit was 101 million yuan (YoY+197.1%,QoQ+7.4%), which increased rapidly in the fourth quarter compared with the previous quarter. We believe that the price of pesticide varieties and gross profit increased synchronously.
Benefiting from tighter environmental regulation and improved demand, the volume and prices of the traditional main industries are rising, which is expected to maintain steady growth. The company is the leader of prochloraz, octanoyl bromobenzonitrile, fluconazole and other subdivided raw drugs, with a large proportion of domestic production capacity and high voice. As a relatively compliant pesticide enterprise, the company has benefited from the stock replacement opportunities brought about by the withdrawal of small scattered sewage production capacity, and the volume and prices of major products have all risen. The current market prices of prochloraz, fluconazole and bifenthrin have increased by 44%, 31% and 39% compared with the beginning of last year. Domestic pesticide exports have continued to grow as a whole, but production has declined due to the impact of environmental protection. Overseas multinational enterprises are expected to replenish inventory for a long time, the company's pesticide products will benefit in the medium and long term, and the traditional main business is expected to continue to grow steadily.
Glyphosate dominates the future growth of the company. Under the grim situation of domestic environmental protection inspectors, overseas giant orders are gradually concentrated to enterprises with safe and environmentally friendly production. The company issues convertible bonds to raise 845 million yuan for the technical transformation project of glyphosate, anti-inverted ester and methoxyfenozide. The price of debt-to-equity swap is 7.74 yuan per share, which is significantly higher than the current stock price to reflect the management's confidence in the intrinsic value of the company. In the short term, glyphosate benefits from the withdrawal of domestic paraquat, and the long-term promotion of genetically modified emerging markets is expected to replicate the growth path of wheat straw. The production of the convertible bond project led by glyphosate will support the growth of the company.
Adjust the earnings forecast to maintain the "buy" rating. Adjusting the profit forecast, the operating income from 2017 to 2019 is expected to be 123.22 yuan, 163.52 yuan and 18.599 billion yuan respectively (previously 114.37 yuan, 137.67 yuan and 16.014 billion yuan), and the net profit of returning home is 4.29,5.35 and 607 million yuan respectively (previously 4.30,5.35 and 607 million yuan). The current stock price corresponds to PE as 18X/15X/13X. The company's executives have recently concentrated on increasing their holdings to demonstrate self-confidence in development, taking into account the expectation of recovery in the lower reaches of the pesticide industry, Huifeng Petrochemical has large flexibility in trade scale, new pesticide production capacity supports growth, and maintains a "buy" rating.
