It is estimated that the net profit of homing in 2018 will drop by 10% to 20% compared with the same period last year.
Kim Jong-da issued a revised announcement of the performance forecast, and the company expects to achieve a net profit of 572 million yuan to 787 million yuan in 2018, down 10% and 20% from the same period last year, which is lower than our expectations. The lower-than-expected performance was mainly due to the rising costs of 4Q18 and the rise in the price of elemental fertilizer at the cost side, but the sluggish demand for compound fertilizer due to the low prices of downstream agricultural products and the decline in sales of compound fertilizer and controlled-release fertilizer products.
Pay attention to the main points
The increase of cost investment, the loss of German Kim Jong Dae in the second half of the year and the expansion of shareholding proportion lead to the loss of 4Q18 performance. The company expects the net profit loss of 4Q18 home to be 167mm to 382 million yuan. The performance loss is mainly due to the increase of 4Q18's investment in the brand and marketing of products such as "pro-soil No.1", which leads to an increase in expenses. It is estimated that the expenses will be about 200 million yuan. At the same time, the seasonality of the subsidiary German Kim Jong Da business is obvious. Due to the off-season of sales in the second half of the year, German Kim Jong Da is expected to achieve an income of 400 million yuan and a net profit of-100 million yuan in August 2018. Since August, the company's shareholding in Germany has increased from 34.7% to 94%. The expansion of the shareholding ratio has led to an increase in profits and losses.
Be optimistic about the development of the company's pro-soil fertilizer and Jinfeng Commune. The company is working hard to promote the concept of soil-friendly planting around the world, and to promote the popularity of soil-friendly fertilizers through demonstration projects. Pro-soil No. 1 fertilizer is mainly used in the field of cash crops, the gross profit margin is high, the company invests heavily in brand and marketing, and its sales are expected to grow rapidly in the future. The expansion of Jinfeng Commune continues to advance steadily. At present, 170 Jinfeng Commune at county level have been built and are under construction. The development of Jinfeng Commune is expected to promote the growth of compound fertilizer sales of the company.
It is proposed to buy back the shares of the company, demonstrating its confidence in development. Based on the confidence of the company's future development and the enhancement of investor confidence, the company plans to use its own funds to buy back the company's shares by means of centralized bidding, with a repurchase amount of 81.5 billion yuan and a repurchase price of no more than 9.88 yuan per share. The repurchased shares will be cancelled and the company's registered capital will be reduced in accordance with the law.
Valuation and suggestion
Due to the lower-than-expected performance, we respectively lowered the 2018 earnings forecast for 19 years by 21% to 0.20 yuan per share to 0.20 yuan per share, and introduced the 2020 profit forecast of 0.38 yuan per share. At present, the company's share price corresponds to the 20-year price-to-earnings ratio of 2019 pound 22 pound 18x. Maintain the target price of 7.2 yuan, corresponding to 2019, 20, 23, 19x P, E, and maintain the recommended rating.
Risk
The sales of compound fertilizer and soil fertilizer were lower than expected, and the promotion of Jinfeng Commune was lower than expected.