Event: the company released the 2021 annual report. During the reporting period, the revenue reached 18.977 billion yuan, an increase of 51.45% over the same period last year. The net profit returned to the mother was 2.654 billion yuan, an increase of 354.56%, and the non-net profit was 2.673 billion yuan, an increase of 567.10% over the same period last year. Among them, the operating income in the fourth quarter was 5.66 billion yuan, an increase of 82.98% over the same period last year, and the net profit was 1.053 billion yuan, an increase of 172.06%. In addition, the company issued a forecast for the first quarter of 2022, which is expected to achieve a net profit of 1.15 billion yuan to 1.25 billion yuan, an increase of 313% to 349% over the same period last year, and a month-on-month increase of 9.2% to 18.7%. The performance exceeded expectations.

The price of core products has risen sharply, and the annual performance has increased significantly. The prices of glyphosate and organosilicon, the company's main products, rose significantly in 2021. Although affected by power restrictions in the industry and rising prices of raw materials, the company gave full play to its management advantages and flexibly adjusted its business strategy, which provided a strong guarantee for achieving good performance. During the reporting period, the company's new silicone devices gradually expanded, and the revenue of silicon-based basic products reached 4.357 billion yuan, an increase of 72.44% over the same period last year, with a gross profit margin of 47.42%, an increase of 28.01 pct over the same period last year. The revenue of silicon-based terminals and special silane products reached 3.204 billion yuan, an increase of 69% over the same period last year, with a gross profit margin of 22.75% and a year-on-year increase of 4.86 pct. The company continues to expand the range of terminal products, with a terminal conversion rate of more than 40%, with medium and high-end products accounting for 44%. The company controls Hefei Xingyu, cooperates with Yingtai Biology, and cuts into the field of selective herbicides, pesticides and fungicides. The income of agrochemical products reached 7.64 billion yuan, an increase of 48 percent over the same period last year, and a gross profit margin of 22.03 percent, an increase of 9.25 pct over the same period last year. In addition, the company set up a Xin'an Brazilian subsidiary, which continued to promote the global layout through the registration of crude drugs in the central and western regions of Africa, and the revenue of overseas subsidiaries increased by 42% compared with the same period last year.

Glyphosate maintains a high profit level, and the categories of agrochemical products are constantly enriched. After years of adjustment, the supply and demand pattern of the domestic glyphosate industry has continued to improve. Global prices of agricultural products have risen in 2021. At the same time, driven by rising prices of energy and raw materials and export growth, the relationship between supply and demand of glyphosate has been tense, and the price and price gap have increased significantly. Since the beginning of 2022, the domestic glyphosate operating rate has been stable, the market demand has weakened, and the price has fallen somewhat. The average market price of glyphosate in January-February is 77,000 yuan / ton, which is 2.2% lower than that of 2021Q4. The current market price of glyphosate in East China is 64,000 yuan / ton, but the price of glycine, the core raw material, has dropped, and the price difference has decreased by 6850 yuan / ton compared with January-February. In the medium and long term, the relationship between supply and demand of glyphosate is good. The company's existing glyphosate production capacity of 80,000 tons / year, Ningxia Xin'an 3000 tons / year glyphosate project was successfully completed in 2021, with the continuous enrichment of agrochemical products, the company's ability to provide comprehensive solutions for plant protection for the industry will continue to improve.

We will optimize the industrial layout by extension and continue to expand the whole silicone industry chain. Since the beginning of 2022, the silicone market has been in short supply and the price has rebounded at the bottom. The average market price of organosilicon DMC in January-February is 310,000 yuan / ton, down 21.7% compared with 2021Q4. The current market price is 37,000 yuan / ton, up 39.62% from the beginning of the year, and the price gap is about 4400 yuan / ton higher than that in January-February. With the gradual release of new production capacity in the industry, the tension between supply and demand of silicone will be alleviated. The company continues to expand to the upper and lower reaches of the industrial chain, Yunnan Yanjin 80 million tons of reserves of the first phase of the silicon project will fully reach production in mid-2021, the company accelerated to promote Yunnan Yanjin 100,000 tons / year new capacity construction, the implementation of Sichuan Pingwu 65,000 tons / year industrial silicon construction project, completed Yunnan Jingcheng 54,000 tons / year industrial silicon acquisition project, with the project gradually landed, the company's industrial silicon capacity will reach more than 300,000 tons / year. In addition, the company has actively expanded its strategic cooperation with downstream photovoltaic enterprises, jointly invested in the construction of the first phase of 200,000 tons / year industrial silicon powder processing project with Leshan Xiexin, and continuously strengthened the layout of the industrial chain.

Maintain the "highly recommended-A" investment rating. We estimate that the net profit of the company in 2022-2024 is 2.86 billion yuan, 3.23 billion yuan and 3.48 billion yuan, the EPS is 3.49,3.95,4.25 yuan respectively, and the current stock price corresponds to 8 times, 7 times and 6 times PE respectively, maintaining the "highly recommended-A" rating.

Risk tips: product prices fall, raw material prices fluctuate, product volume is lower than expected.