1H20 performance is in line with our expectations
Sirte announced 1H20 results: revenue of 1.955 billion yuan, an increase of 39.1% over the same period last year, and net profit of 134 million yuan, an increase of 30.4% over the same period last year, corresponding to 0.19 yuan per share, which is in line with our expectations. The sharp increase in the company's revenue in the first half of the year was mainly due to the increase in sales of chemical fertilizer products, while the revenue from trading products increased by 277 million yuan compared with the same period last year. 1H20's domestic revenue increased by 58.9% to 1.954 billion yuan compared with the same period last year; due to the impact of the overseas epidemic, foreign market revenue decreased by 99.3% to 1.24 million yuan. Due to the decline in the price of monoammonium phosphate and the increase in the share of revenue from low gross margin trading, 1H20's gross profit margin fell 2.8ppt to 18.3% year-on-year. IH20 deducted 126 million yuan in non-net profit, an increase of 41.6 percent over the same period last year; the net cash flow generated by operating activities was 656 million yuan, an increase of 665 million yuan over the same period last year.
2Q20 achieved an income of 1.097 billion yuan, a 24% increase of 28% compared with the previous month, a net profit of 73 million yuan, a 23% increase of 20%, a gross profit margin of 18.4%, a year-on-year decline of 1.2ppt and an increase of 0.3ppt.
Trend of development
The increase in sales of monoammonium and compound fertilizer led to an increase in income. Benefiting from the increase in compound fertilizer sales, 1H20's compound fertilizer revenue increased by 16.3% to 919 million yuan compared with the same period last year. Due to the decline in raw material prices, the gross profit margin of compound fertilizer increased by 2.08ppt to 19.68%. According to Zhuochuang data, the ex-factory price of monoammonium phosphate of 1H20 fell 14.8% to 1849 yuan / ton compared with the same period last year, but the increase in sales volume led to an increase of 29.2% to 599 million yuan in revenue of monoammonium phosphate from the same period last year. Due to the impact of the decline in monoammonium price, the gross profit margin fell 2.49ppt to 17.17%. Affected by the epidemic, 1H20's mining revenue fell 59% year-on-year to 26.44 million yuan, of which phosphate rock revenue fell 71% year-on-year to 18.6 million yuan.
We will continue to improve the industrial chain and fund-raising projects such as new fertilizers and soil conditioners to boost growth.
In 2019, the company's pyrite ore technical renovation project entered the stage of formal production. Affected by the epidemic, 1H20 Company Maweishan Pyrite Mine mined 1.56 tons of pyrite, sold 15800 tons of pyrite, sold 12900 tons of lead and zinc ore, and sold 7900 tons of other metal mines. In 2019, the company issued convertible bonds to raise 800 million yuan to build a project with an annual output of 650000 tons of new fertilizers and 400000 tons of soil conditioners, which will promote the large-scale development of new fertilizers such as bio-organic fertilizers. At present, 10,000 tons of functional bacteria and 100,000 tons of soil conditioning agents have been built in the first phase of the project, and we expect that the construction of the project will contribute to the performance growth of the company.
Profit forecast and valuation
We maintain 2020Universe's 21-year profit forecast of 25Universe 342 million yuan, and the company's share price corresponds to the 21-year price-to-earnings ratio of 2020Universe 18amp 13x. Due to the upward move of the valuation center of the industry, we raised our target price by 20% to 7.2 yuan, corresponding to a 16% upside and a 21-plus 15x price-to-earnings ratio in 2020, maintaining an outperforming industry rating.
Risk
The price of chemical fertilizer products has fallen, and the progress of new projects has been lower than expected.
