The company expects net profit for the first half of 2022 to be 1.25 billion to 1.33 billion yuan, up 40 to 50 per cent from a year earlier.
The company's performance in the first half of the year far exceeded expectations, so we raised the 22-year-old net profit of Xinlianxin Fertilizer to 1.8 billion, an increase of 39 per cent over the same period last year. Maintain the target price of HK $11.2, corresponding to a 22-year price-to-earnings ratio of 6.3 times forecast earnings, with 98% room to rise from the current price.
Summary of the report
Issued Yingxi announcement, net profit increased by 40-50% in the first half of the year. The main reasons for the performance growth are as follows: 1. The operation of the Xinxiang compound fertilizer multi-function tower project, the rare gas refining project and the reconstruction and expansion project of Tianxin Coal Mine promote the transformation and upgrading of the industrial chain, promote the diversified development of related products, and make the company have more than one tail. The advantage of flexible adjustment is more obvious to maximize profitability. 2. The company should give full play to the advantages of the park, integrate high-quality resources, constantly optimize the product structure, increase the promotion of efficient fertilizer and promote the research and development of new technologies, enhance the core competitiveness, further enhance the advantages of low cost and product differentiation, and create greater profit space. 3. International energy shortage, limited new production capacity, tight balance between supply and demand, and rising food prices have promoted the sales and prices of chemical fertilizers and chemicals. The company's main products, urea, compound fertilizer and methanol, have benefited significantly.
Urea prices continued to rise in the first half of the year and are expected to fall in the third quarter. The price of urea in China continued to rise in the first half of 22, rising from 2500 yuan / ton at the beginning of the year to 3100 yuan / ton at the end of June, an increase of 24%. The industry entered the off-season in the third quarter, and urea prices are expected to fall somewhat.
DMF is about to go into production and will become a new performance driver. DMF is a chemical called dimethylformamide, which is widely used in polyurethane, electronics, man-made fibers, pharmaceuticals and food additives. The first phase of 100000 tons of DMF in China will be put into production in August 22, and the second phase of 100000 tons of DMF will be put into production in the second half of 23 years.
We estimate that the effective production of Heart-to-Heart DMF in 22 and 23 years is 30,000 tons and 150000 tons, and as of early July, the average market price of DMF is 13000 yuan / ton. DMF products are expected to contribute 390 million and 1.95 billion in 22 and 23 years, becoming the new performance driver.
Maintain the target price of HK $11.2, buy rating. The company's performance in the first half of the year far exceeded expectations, so we raised the 22-year-old net profit of Xinlianxin Fertilizer to 1.8 billion, an increase of 39 per cent over the same period last year. Maintain the target price of HK $11.2, corresponding to a price-to-earnings ratio of 6.3 times forecast earnings for 22 years, which is 98% higher than the current price.
Risk hint: industry competition intensifies; epidemic situation intensifies.