Events:
On April 27, Fengshan Group released its 2019 annual report and quarterly report. The company achieved revenue of 866 million yuan in 2019,-34.24% of the same period last year, and a net profit of 34.7589 million yuan, or-74.95% of the same period last year. In the first quarter of 2020, the company achieved revenue of 451 million yuan, year-on-year + 23.75%, net profit of 84.1206 million yuan, + 57.99%, and non-return net profit of 82.3874 million yuan, + 68.4%.
In terms of operating data, 1) herbicides, sales volume 5622.38 tons, year-on-year + 130.4%, price 511,000 yuan / ton, year-on-year-39.89% 2) pesticides, sales volume 3262.77 tons, year-on-year + 13.5%, price-5.26%. In addition, the prices of the main raw materials of the products fell, of which dichloronicotinic acid, pyrimidine amine, p-chlorotoluene and hydrogen fluoride all decreased by more than 20%.
Main points of investment:
The storm of stopping production has passed, and the fact that it exceeded expectations in the first quarter is due to good management. The company stopped production for most of the 321 incident in 2019, which led to a decline in performance that year. However, the company has basically returned to normal production since October, and the company maintained normal operation even during the epidemic in 2020. In addition, the 2019 shutdown began in the second quarter, and the first-quarter results were not affected, so the better-than-expected performance of 2020Q1 is mainly a reflection of operational capacity.
Competitors shut down under the global epidemic, trifluralin and chlorpyrifos were released in the first quarter. From the operating data, product prices fell slightly in the first quarter compared with the same period last year, and the performance mainly came from volume premium. The company's four main varieties involve three herbicides (quizalofop, nicosulfuron, fluralin) and one insecticide (chlorpyrifos), mainly from trifluralin and chlorpyrifos. Domestic and foreign competitors stopped production during the epidemic, and the company took advantage of the potential to occupy the market. In particular, trifluralin, the company's domestic market share of 80%, competitors mainly from overseas, the global epidemic is long-term, the company is expected to benefit in the long term. In addition, the average price of herbicides fell nearly 40% in the first quarter mainly because of statistics. The price of trifluralin was much lower than that of quizalofop and nicosulfuron, and the former naturally pulled down the average price of the product.
Low oil prices, lower raw material prices and higher gross profit margins. The company's gross profit margin in the first quarter was 33.2%, an increase of 3.6 pct over the same period last year, mainly due to the decline in upstream raw material prices and the widening product price gap caused by the global epidemic and low oil prices.
The project will be put into production at the end of the year to provide new performance growth points. The company went public in 2018, raising a total of 575 million to invest in a number of projects: including 1500 tons of nitrosulfonone, 800tons of quizalofop, 500tons of furfuryl, 700tons of cyanofluoxate, 300tons of alkynyl ester, 1000 tons of trichloropyloxyacetic acid and 1000 tons of butoxylethyl acetate. Some of the projects are expected to be put into production in December 2020, providing new performance increments.
Profit forecast and investment rating: first coverage, given a "buy" rating. The company is mainly engaged in small varieties of pesticides, the product competitive advantage is significant. Under the global epidemic, the production capacity of competitors is limited, the company takes advantage of the opportunity to expand market share and increase the voice of the industry. We expect the company's EPS to be 2.98,3.28,3.68 yuan per share from 2020 to 2022, with a corresponding price-to-earnings ratio of 11.02,10.02 and 8.93 times. Coverage for the first time, giving a "buy" rating
Risk tips: competitors resume production or put in new capacity, rising oil prices lead to increased costs, safety and environmental risks.
