Core viewpoints
Red Sun 3000 tons of oxamidophosphonium has been successfully put into production, with technical advantages such as low cost, high safety, energy saving and less discharge. At present, the main domestic production capacity of glyphosate is about 33000 tons, the company's production capacity accounts for 9%, and the industry operating rate has warmed up. With the future project reaching production capacity, it is expected to create new performance growth points for the company. We maintain the company's target price of 30 yuan and maintain the "buy" rating.
3000 tons of oxamidophosphonium has been put into production, creating a new growth point of performance. The company announced on December 26, 2018 that the glyphosate project of Nanjing Red Sun biochemical Construction, a wholly owned subsidiary, was completed recently and successfully started at one time. The project has an annual production capacity of 3000 tons and has technical advantages such as low cost, high safety, energy saving and less discharge. In recent years, the glyphosate industry has expanded rapidly, and the overall operating rate has warmed up in the second half of 18 years. The total production capacity of the main domestic production enterprises is 33000 tons, and the company's production capacity occupies 9%. As the project reaches production capacity in the future, the company's competitiveness and voice in the sterilized herbicide market will be further improved, creating new performance growth points for the company.
Multi-product production capacity continues to release, consolidate the leading position. In the first half of 2018, the company successfully put into production 10, 000 tons of biochemical enemy grass fast industrial chain, 10, 000 tons of biochemical VB3 industrial chain and 25000 tons of biochemical pyridine alkali industrial chain. We believe that after the release of the above production capacity, the integrated layout of the company's industrial chain will be further improved. In the current supply side continues to clear the environment, the company with the leading position and cost advantages, the market share is expected to further improve, profitability can continue to improve.
The proposed acquisition of Chongqing Zhongbang, the industrial chain to promote growth. The company plans to buy 100% equity of Chongqing Zhongbang for 1.186 billion yuan, and its main products are three pharmaceutical intermediates 2pyrrolidine and ZPT. Chongqing Zhongbang industrial chain is an important supplement to the company's existing product range, and has a synergistic effect with the company's original industrial chain. We are optimistic that the prosperity of the industry will rise under the tight supply and demand pattern, and Chongqing Zhongbang is expected to increase its market share under the background of production restrictions of leading enterprises. The acquisition promises that the net profit of Chongqing Zhongbang from 2018 to 2020 is not less than 6449 yuan, 8477 yuan and 112.14 million yuan respectively, and the statement is expected to drive the company's performance growth.
Risk factors: lower-than-expected capacity release; increased competition in the industry; declining global demand for pesticides.
Investment suggestion: maintain the forecast of the company's annual return net profit in 2018-19-20 as 998149C 1.356 billion yuan, corresponding to EPS 1.72Unix 1.98Unix 2.33. Maintain the target price of $30 and the "buy" rating at 18 times PE in 2018.
