The performance was slightly lower than expected
The company released its three-quarter report in 2019, with a cumulative income of 3.215 billion yuan in the first three quarters, an increase of 2.98% over the same period last year, and a net profit of 263 million yuan, down 11.25% from the same period last year. Among them, the operating income in the third quarter was 762 million yuan, down 1.31% from the same period last year; the net profit was-5.834 million yuan, down 151.14% from the same period last year; and the performance was slightly lower than we expected.
Low demand for pesticides, strengthen cash and expense control
Global pesticide demand is low, the company's traditional preparation business revenue is expected to decline slightly, growth mainly depends on the income growth of holding dealers. The third quarter is the traditional off-season in the domestic agricultural market, so revenue in the third quarter fell 43.68% from the previous quarter, slightly down 1.3% from the same period last year. The distributor's gross profit margin is lower than that of the preparation, and the change in the income structure leads to the company's third-quarter gross profit margin of 22.97%, which is lower than that of the same period last year. 4.1PCT.
The company strengthens the control of funds and expenses to improve human efficiency, and the sales expenses, management expenses, research and development expenses and financial expenses are reduced by 5.42%, 4.19%, 3.16%, 2.24% respectively. The net operating cash flow-230 million is significantly better than the same period last year-770 million, and the cash flow for the whole year is expected to improve significantly during the fourth quarter payback period.
Preparation profits are expected to stabilize and pick up next year.
The company is the leader in the pesticide preparation industry in China, with preparation revenue significantly ahead of its domestic counterparts in the past 17 years, with a market share of less than 4% (Zhuochuang Information, Agricultural material Market Network). Affected by the environmental protection policy in the past two years, this year's Yancheng accident led to underemployment of some pesticide enterprises, relatively high raw drug prices, and increased pressure on the company's raw drug procurement. The follow-up pesticide enterprise rectification ends and starts to return to normal, the company's procurement costs are expected to be reduced, and the preparation business gross profit margin is expected to stabilize and pick up. With the formal implementation of the new pesticide management regulations in June 17, the preparation market will be gradually standardized, the competition pattern will be improved, and it will also help the company to increase its market share.
Integrate multi-resources to build a comprehensive industrial chain of characteristic crops
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 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 build a first-class fire dragon fruit single crop industry chain from breeding and seedling breeding, planting system, channel sales and brand access. Recently, the company has joined hands with Yicheng Investment, Guangdong Agricultural Fund and Guangzhou Development Fund to set up an industrial fund with a scale of 500 million yuan in the first phase, laying out modern agricultural comprehensive industries and realizing industrial transformation and upgrading in the field of agriculture.
Profit forecast and valuation: the EPS forecast of the company from 2019 to 2021 is 0.36x0.45x0.59 respectively, and the current stock price corresponds to the PE of 17.7X, 14.1x and 10.8X in 19-21 years. The company is the leader of the pesticide preparation industry, the supervision and strengthening of the company's market share is expected to gradually increase, the transformation of comprehensive agricultural services, the planting of characteristic crops is expected to increase next year. Maintain the buy rating.
Risk hint: the price of raw pesticide has risen sharply, and the sales of agricultural products are lower than expected.
