Items:

The company issued a forecast for the first quarter of 2018 on March 30. During the reporting period, the company made a profit of 103.7719 million yuan to 118.5965 million yuan, down 30% to 20% from the same period last year, excluding the equity transfer premium of 58.3971 million yuan formed by the transfer of equity in Nongyi Electronic Commerce (Beijing) Co., Ltd. in the same period last year, the operating performance in the first quarter increased by 15.50% to 32% compared with the same period last year. Our comments on this are as follows:

Comments:

The industry boom has been maintained, and the performance of the main business has increased steadily. Excluding the 17-year equity transfer premium, the company achieved steady growth in its performance in the first quarter, mainly due to the continued high prosperity of the pesticide industry under the new normal of environmental protection and the steady development of petrochemical warehousing and trade projects.

The pesticide industry is booming, and high product prices are expected to continue. After the trough of 2015 and 16, the demand in the lower reaches of the pesticide industry increased steadily, and strict environmental supervision continued to put pressure on pesticide enterprises during the year, tightening the supply of raw materials and middlemen on the one hand, and accelerating the clearing of the supply side of the industry on the other. It is good for the industry leaders to further integrate production capacity and improve performance. Although at the beginning of 18 years, the prices of some pesticides were consolidated at a high level, due to the improvement of the supply and demand pattern, the prices of pesticide products remained high. We believe that the company, as the top five industry leader in market sales, has a number of core products at the industry leading level, including glyphosate, prochloraz, octanoylbromobenzonitrile, and so on, and has established stable customer relationships with a number of multinational agrochemical companies. it is expected to share dividends and continue to benefit and make huge profits from this round of rising cycle of the industry and high pressure on environmental protection.

Glyphosate demand expansion is approaching, superimposed patent over-protection peak, the company's performance has a lot to see. Glyphosate has low toxicity and weak resistance, so it has an advantage in the current environment of increasing demand for pesticide properties, and due to the complete prohibition of paraquat in China and the conversion of domestic demand of 12,000 to 16,000 tons, its demand is expected to be released quickly. In addition, due to the environmental supervision in 2017 to a certain extent limited the process of glyphosate, which is a complex product, it is almost impossible to expand production for a long time in the future, maintaining a high capacity concentration in the industry.

As one of the few leading companies in the industry, the company currently has a production capacity of 1500 tons and has been distributing glyphosate production capacity, which is expected to maintain profit growth in the current high business cycle of the industry. In addition, the company's long-term order relationship with agrochemical giants BASF and Bayer is expected to promote the company to take the lead in obtaining patent transfer during the patent overinsurance peak, thus taking the lead in laying out the new product market.

Huifeng Petrochemical, a subsidiary, is developing steadily, and the second phase of the project will continue to increase profits. The company's petrochemical warehousing project was put into construction in 2012, and the first phase of the 148,000 square warehousing project was officially put into operation in 2016 and realized the subsidiary's turnround, increasing profits by 15.21 million yuan compared with the same period last year. The organizational construction of the second phase of the project was carried out in an orderly manner, and the progress reached 92% in June of 17 years. The income of the subsidiary's dangerous chemicals warehousing and trading business is growing rapidly and has made a great contribution to its 17-year performance. In the future, it is expected to expand its business scope and open up the market by building a bonded warehouse and pledge warehouse on the basis of the existing warehousing. Steady progress to "become an e-commerce trading platform for petrochemicals in East China", bringing a strong driving force to the company's performance.

Risk factors: product market competition aggravates the risk; raw material fluctuation risk of main products; petrochemical project construction is less than expected risk.

Maintain a "buy" rating. We are optimistic about the long-term development of future results, maintaining the company's 2017-18-19 EPS forecast of 0.31, 0.40 and 0.47 yuan respectively, maintaining the target price of 7.22 yuan, and maintaining the "buy" rating.