Performance summary: the company achieved operating income of 880 million yuan in the first half of 2020, an increase of 32.5% over the same period last year. The net profit attributed to shareholders of listed companies was 160 million yuan, an increase of 94.1% EPS 1.94 yuan.
At present, the company mainly distributes four series of pesticide varieties. The company is a high-tech enterprise, a designated pesticide production enterprise, a vice president of China Pesticide Industry Association and an executive director of China Pesticide Development and Application Association. At present, the company's main products are fluralin, quine, nicosulfuron, chlorpyrifos and other four series of products the company has 11000 tons of chlorpyrifos, 1300 tons of quinoline, 1200 tons of nicosulfuron, 6000 tons of fluralin and 20000 tons of preparations. Most of the company's revenue comes from herbicides.
The resumption of production by the factory led to a sharp rebound in performance in the first half of the year. In April 2019, due to the suspension of external heating by Yancheng Lingyunhai Thermal Power Co., Ltd., the company's crude drug synthesis workshop stopped production for half a year, which dealt a major blow to the performance in 2019. At the end of 2019, the company's production capacity returned to normal, and in the first half of 2020, despite the impact of overseas epidemic conditions, the company's main products nicosulfuron, trifluralin, quizalofop and chlorpyrifos were sold well. With the help of mature domestic sales channels and Nanjing Fengshan trade platform, the company successfully achieved sales. Due to the decline in oil prices, the prices of the company's products were also suppressed by oil prices, the prices of quizalofop and chlorpyrifos declined slightly, the prices of trifluralin remained stable, and the prices of nicosulfuron rose in the first half of the year. However, the company's profitability has improved, with a gross profit margin of 32.6% and a net profit rate of 18.3% in the first half of the year, both reaching the highest level in nearly a decade.
Open up a second production base to avoid the risk of a single base. In order to disperse the concentrated risks brought by a single production base, but also to expand production capacity, enrich product types, increase the company's core competitiveness, and find new profit growth points, at present, the company has signed a relevant agreement with the Management Committee of Guang'an Economic and technological Development Zone, which plans to invest 1.6 billion yuan to build a new production base in Guang'an area.
The pesticide industry has entered the reshuffle process, leading enterprises are expected to benefit. With the development of China's pesticide industry and the continuous implementation of safety and environmental protection policies in the pesticide industry, the production capacity of domestic pesticide products shows a stable trend. As for enterprises, the backward small and medium-sized production capacity began to withdraw one after another, and the product concentration gradually increased. The development of the production capacity of China's pesticide industry is divided into two stages, 2010-2015, the output increases year by year, and reaches the peak in 2015, the output is about 3.744 million tons. After that, with the gradual improvement of the national requirements for safety and environmental protection in the pesticide industry, the output has a downward trend, to 2019, the output is about 2.254 million tons, a significant decline.
The decline in output is not only the embodiment of the improvement of industry concentration, but also the result of the pursuit of high-quality development of the pesticide industry.
For a period of time in the future, driven by industrial policy, environmental protection pressure, industry competition, entry barriers and other factors, China is expected to have a number of leading enterprises with advantages in scale, reasonable product structure, ability of independent innovation, and in line with environmental protection, safety supervision requirements and industrial policies.
Profit forecast and investment advice. It is estimated that the EPS from 2020 to 2022 will be 3.04,3.55,3.68yuan respectively, considering that the current valuation of the company is still low, the future production of fund-raising projects and the improvement of industry concentration will provide support for the future growth of the company, giving the "buy" rating, referring to comparable companies, and giving the company 16 times the valuation level in 2020, with a target price of 48.64 yuan.
Risk tips: raw material price fluctuation risk, production safety risk, tax preference policy change risk, exchange rate, gross profit margin fluctuation risk, trade friction risk, fund-raising project put into production and production schedule may not meet expectations.