Event: the company released its 2019 annual report, with annual revenue of 3.016 billion yuan (year-on-year-3.55%) and net profit of 238 million yuan (year-on-year-20.66%).
The decline in the fertilizer market has led to a decline in the company's performance: the decline in the company's 2019 performance is mainly due to lower gross profit margins, lower investment income, and increased costs during the period. Affected by the decline in the chemical fertilizer industry, the company's comprehensive gross profit margin in 2019 was 21.19%, down 3.34 pct from the same period last year. In 2019, the company's total sales of chemical fertilizer products were 1.3668 million tons, down 7.54 percent from the same period last year. Guizhou Lufa Industrial Co., Ltd., an associate of the company, is carrying out the third phase of reconstruction and expansion, resulting in a decline in phosphate ore mining and sales in 2019, resulting in a loss of 32.2545 million yuan. At the same time, the issuance of convertible bonds at the beginning of 2019 led to an increase in fees for the period compared with the same period last year.
Under the regulation of "three phosphorus", the concentration of phosphate fertilizer industry has been improved, and the integration of the company's industrial chain has reduced costs and increased efficiency: in 2019, the country has carried out "three phosphorus" rectification actions for phosphate chemical enterprises such as phosphate rock, phosphate fertilizer and phosphate pesticide manufacturing. some small and medium-sized enterprises and backward enterprises have been eliminated in the competition, and the concentration of phosphate fertilizer industry in China has been further improved. The company now has three chemical fertilizer production bases of Ningguo, Xuancheng and Bozhou in Anhui, Mawei Mountain Pyrite Mine in Xuancheng and Kaiyang phosphorus Mine in Guizhou, which has formed a relatively complete integrated industrial chain from pyrite sulphuric acid to phosphate compound fertilizer production and marketing. In 2019, the company's Maweishan pyrite mining technical renovation project entered the stage of formal production and production, which further ensured the supply of sulfuric acid raw materials with an annual output of 800000 tons in the company's three pyrite sulfuric acid production lines and effectively reduced the production cost. In the same year, the company has completed the increase of 20% stake in Guizhou Lufa, which is the company's largest phosphate ore supplier, ensuring the supply of raw materials.
Vigorously develop new green fertilizers and actively promote transformation and upgrading: with the commissioning of the company's 600000 ton new compound fertilizer project in Bozhou and the 300000 ton compound fertilizer project in the first phase of Xuancheng 900000 ton new compound fertilizer project, the production capacity of the company's new fertilizer is gradually increasing. In April 2019, the company issued convertible bonds with a face value of 800 million yuan to the public, with a maturity of 6 years, to raise funds for the construction of projects with an annual output of 650000 tons of new fertilizers and 400000 tons of soil conditioners. promote the large-scale development of the company's bio-organic fertilizer and other new fertilizers, in line with the needs of agricultural green development. According to the announcement, at present, the project has completed the construction of the plant and is in the process of purchasing and installing equipment. The company adheres to the road of ecological formula fertilizer, vigorously develops soil testing formula fertilizer, and actively develops new fertilizers, which is expected to quickly seize the market and realize the transformation and upgrading of the company.
Investment suggestion: the company's net profit from 2020 to 2022 is expected to be 300 million yuan, 370 million yuan and 450 million yuan, corresponding to 11.5,9.5 and 7.7 times of PE.
Risk tips: raw material price fluctuations, lower-than-expected demand and so on.
