Kim Jong-da released three quarterly reports for 2018. In the first three quarters of 2018, Kim Jong-da achieved 21.253 billion yuan in operating income, + 12.34% year-on-year, 954 million yuan in net profit attributable to the parent company, + 5.14% in the same period last year, and basic earnings per share, with a weighted average return on net assets of 9.73%.
The price of compound fertilizer has risen and the price gap has narrowed. In the first three quarters of 2018, as the prices of various simple fertilizers and liquid ammonia products rose, and the prices of compound fertilizers also rose under the support of costs, the average price of ternary compound fertilizers in eastern China was 2090 yuan / ton, up 9.0 percent from the same period last year. However, as the compound fertilizer industry is still in a state of overcapacity, price transmission is unfavorable, and the product price gap narrowed, the price difference of ternary compound fertilizer in the first three quarters of 2018 was 432 yuan / ton, down 11.6% from the same period last year. Judging from the operation of the company's main products in the first half of the year, the company's income from compound fertilizer products increased, but the gross profit margin declined.
Issue shares to buy 66.67% of the shares of the agricultural investment company. In October 2018, the company issued 133 million shares to buy 66.67% of the shares in the agricultural investment company. after the completion of the transaction, the company acquired a 100% stake in the agricultural investment company, thus directly or indirectly holding 94% of Jong da in Ningbo. Ningbo Kim Jong Da owns 100% stake in German Kim Jong Da. The latter is mainly engaged in the production and sales of horticultural consumer products and special fertilizers, and its performance from 2018 to 2020 promises that the net profit of non-return under the consolidated statement will not be less than 9.57 million euros, 11.11 million euros and 15.08 million euros, respectively. After the completion of the acquisition, the company's industrial chain is further expanded and the product line is richer.
To terminate some investment projects with raised funds. In October 2018, according to the changes in the market environment, the company decided to terminate the agrochemical service center project and use 468 million yuan of raised funds (including interest) to permanently replenish the working capital. 6.53 million yuan has been invested in the project, and the investment progress is only 1.52%.
Jinfeng Commune signed a strategic cooperation agreement to open up the sales of agricultural products. In July 2018, Jinfeng Commune and Zhengda Handing signed a strategic cooperation agreement to set up a joint venture company to invest in the utilization of livestock and poultry wastes. With the help of this cooperation, Jinfeng Commune will further open up the sales links of agricultural products in agricultural services, realize the services of downward agricultural materials, agricultural planting and the whole industrial chain of agricultural products upstream; at the same time, with the help of the company's technological advantages, realize the effective use of livestock and poultry waste resources and achieve new profit growth points.
Profit forecast and investment rating. As a leading enterprise in China's chemical fertilizer industry, Kim Jong-da's new fertilizer production capacity continues to grow and product innovation continues. After the company acquired a 66.67% stake in the Agricultural Investment Company, its shareholding in overseas high-quality growth assets increased to 94%. In overseas assets, the gross profit margin of potted soil, plant protection fertilizer and plant protection products is much higher than that of traditional compound fertilizer products, and the proportion of this kind of business continues to increase. We believe that we can give Kim Jong Dah a certain valuation premium, and we estimate that the company's EPS in 2018-2020 will be 0.27,0.34,0.37 yuan respectively. According to 2018 EPS and 20-22 times PE, we will give the company a reasonable value range of 5.40-5.94 yuan (corresponding to PB is 1.62-1.78 times) with a rating of "better than the city".
Risk tips: the risk of sharp fluctuations in product prices; business development is not up to expectations.
