Performance is in line with expectations

The company released its mid-year report in 1919, with revenue of 2.453 billion yuan in 18 years, an increase of 4.38% over the same period last year, and a net profit of 269 million yuan, down 5.65% from the same period last year, deducting 246 million yuan from non-net profit, an increase of 2.51% and 0.3 yuan over the same period last year. The performance is in line with expectations.

A slight increase in revenue, strengthen the control of dealers

The company's headquarter preparation business income was 1.367 billion yuan, down 4.67% from the same period last year, mainly due to low global pesticide demand and falling prices. According to the statistics of the Pesticide Association, the pesticide price index CAPI in May was 98.22, which was 5.92 points lower than that at the beginning of the year. The consolidated income of 1.077 billion yuan of holding dealers increased by 17.9% over the same period last year, and the net profit of the table was 11.88 million yuan, down 23.44% from the same period last year. Among the 54 holding dealers, 41 were listed and 77 participated in the dealers. The decrease in the number of shares is mainly due to the company's strengthening the management of shareholding dealers, taking the initiative to survive the fittest, from the pursuit of quantity to the pursuit of quality. The company's operating cash flow improved significantly after strengthening the control of dealers, with a net outflow of 196 million yuan in the first half of 19 years, reducing the outflow by 429 million yuan.

The decline in dealer net profit is mainly due to the increase in short-term costs due to the large investment in the early stage of planting characteristic crops and the time needed for output. Profitability remained stable, with the gross profit margin of 28.75% slightly lower than the same period last year, and the expense rate also decreased by 1.2PCT. The decline in net profit was mainly due to a 52.4 million decrease in investment income from the same period last year. The overall operation of the company is stable.

Pesticide management is stricter and the leading share of preparations is expected to increase.

The company is the leader in China's pesticide preparation industry, with income close to the sum of the second and third places last year, with a market share of only 4% (Zhuochuang Information, Agricultural material Market Network). The decentralization of the industry is mainly due to the low supervision of the industry, the formal implementation of the new pesticide regulations in June 17, the preparation market will be gradually standardized, and the original drug will also be accelerated under the influence of environmental protection policies. With reference to foreign mature markets, we believe that Nopsson's market share is expected to increase significantly.

The offline advantage is obvious, and the planting of characteristic crops is worth looking forward to.

The company focuses on the high-value characteristic crop industry chain management, with the "company + farmers + partners" agricultural science and technology industrial park development model, the whole industry chain layout management. The company's own brand of red dragon fruit has a layout of more than 7000 mu, and has set up a joint venture with a hundred orchards, heaven and earth and other companies to gather the advantageous resources of all parties to create a path from breeding and seedling breeding, planting system, channel sales and brand. Build a first-class pitaya single crop industry chain.

Profit forecast and investment suggestion

Due to the influence of the weather and the sluggish demand for pesticides, the company's EPS forecast for 2019-2021 is 0.36max 0.45max 0.59 yuan (the previous value is 0.45max 0.58max 0.69 yuan). The current stock price corresponds to 17.8X, 14.2X and 10.8X for 19-21 PE. The company is the leader in the pesticide preparation industry, the supervision and strengthening of the company's market share will gradually increase, transform comprehensive agricultural services, and cooperate with companies such as hundred orchards, the planting of characteristic crops is expected to increase next year. Given 22 times PE for 19 years, with a target price of 7.92 yuan, to maintain the buy rating.

Risk tips: product price downward; new project production schedule is not as expected; production safety risk