The company works with JD.com to carry out agricultural industry-wide chain cooperation to create a "Internet + agriculture" development model, which is expected to expand product channels. The company is the leader of domestic compound fertilizer, with the multi-point layout of agricultural trusteeship, Internet + and globalization, we are optimistic about the long-term development of the company. Maintain the target price of $11.5 and the "buy" rating.
Work with JD.com to carry out agricultural cooperation to help expand product channels. On February 25, 2019, the company signed the Strategic Cooperation Framework Agreement with JD.com, which decided to carry out cooperation covering the whole agricultural industry chain in the seven dimensions of product sales, JD.com farm project, agricultural research institute, agricultural finance, agricultural product sales, supply chain cooperation and user cooperation. This cooperation is expected to enhance the company's core competitiveness in the field of agriculture, create a "Internet + agriculture" development model, and is expected to help the company to further expand product channels.
Agricultural trusteeship is supported by policy, and the volume of Jinfeng Commune is expected. The "opinions on promoting the Organic connection between the Development of small Farmers and Modern Agriculture" was issued recently, clearly pointing out that we should speed up the development of agricultural trusteeship services and inject new vitality into the development of agricultural trusteeship industry. At present, Jinfeng Commune has built more than 100 county-level communes. In the future, with the support of modern agricultural development policies, Jinfeng Commune relies on the company's high-quality resources in products, channels, funds, talents, and so on. It is expected to achieve long-term development goals and profit expansion.
Promote the global layout and expand the high-end market. In August 2018, the company completed the acquisition of 66.67% of the shares of Agricultural Investment Company, the de facto controller of Germany's Kim Jong Da and Kangpu, and became its wholly-owned parent company. Through this acquisition, the company will further promote its international layout, and in the future, it is expected to take advantage of Li Kangpu's comprehensive research and development of high-end products, sell high-end chemical fertilizer products to the world, and make use of the brand influence of Kangpu Company. Reverse capture China's domestic high-end market occupied by foreign investors.
Risk factors: 1) the price of agricultural products falls; 2) the price of raw materials fluctuates; 3) the policy risk; 4) the business promotion is not as expected.
Investment suggestion: the company is the leader of compound fertilizer in China, and the traditional business is expected to benefit from the recovery of agricultural products; in the future, with the multi-point layout of agricultural trusteeship, Internet + and globalization, we are optimistic about the long-term development of the company. Maintain the 2018-20 EPS forecast of 0.34, 0.46, 0.60 yuan, and maintain the target price of 11.5 yuan and the "buy" rating.