Incident: The company released its report for the third quarter of 2022. The company achieved revenue of 3.80 billion yuan in the first three quarters of 2022, an increase of 47.2% over the previous year; achieved net profit of 47.2% over the previous year; achieved net profit of the mother returned to the mother after deduction of 480 million yuan, an increase of 62.9% over the previous year. Among them, in 2022 Q3, the company achieved revenue of 990 million yuan, an increase of 59.0% over the previous year and a decrease of 38.4% from the previous month; it achieved net profit of 100 million yuan, an increase of 22.7% over the previous year and a decrease of 45.7% from the previous month.
The third quarter was the traditional low season for pesticide sales, and the 22Q3 company's performance increased year-on-year and declined sequentially. Benefiting from the sharp rise in pesticide prices, the 22Q3 company's performance increased year-on-year, but in August 22, the safety incident in Shandong Hailier, a wholly-owned subsidiary of the company, had a certain impact on the company's production and operation performance. In addition, the third quarter was the traditional low season for pesticide sales, and the 22Q3 company's performance declined sequentially. In terms of sales, 22Q3's pesticide sales were 11,700 tons, a decrease of 26.1% over the previous month, but an increase of 64.5% over the previous year; fertilizer sales were 961.26 tons, a decrease of 49.9% and 61.2% respectively over the same period last year. In terms of unit sales price, 22Q3 pesticide prices declined month-on-month. The average price of the company's pesticide was 8.22 yuan/ton, down 2.1% and 17.9% respectively from the same period; fertilizer prices rose month-on-month. The average price of the company's fertilizer sold 1.15 yuan/ton, up 27.7% and 61.3% respectively over the same period last month.
On the cost side, prices of the company's main raw material products continued to fluctuate in the first three quarters of 2022. Acrylonitrile, dimethylformamide, toluene, monomethylamine products, and liquid chlorine changed by -21.08%, +13.91%, +49.03%, +107.29%, and -59.42%, respectively. Furthermore, the company continued to increase investment in R&D, and the company's R&D expenses rose 51.2% year-on-year to 160 million yuan in the first three quarters of 2022.
The layout of the integrated pesticide industry chain is progressing well, and the registration layout for pharmaceuticals and original drug products has been perfected. The company continues to deepen the strategy of integrating original drugs, intermediates, and formulations. In June 22, the first phase of the company's Qingdao Hengning project began trial production of the insecticide butyl ether urea, bromoponitrile, and the biocides phenyl ether meconazole, and proconazole, and the second phase of the Qingdao Hengning project entered the construction phase. Shandong Hailier will also build new construction projects for novel biocides, herbicide original drugs and drug intermediates, which mainly include an annual output of 3,000 tons of prothiobazole original drug products. Furthermore, the company is also continuously strengthening its development efforts in foreign markets to hedge against adverse effects brought about by market changes through multiple varieties and markets. At the same time, the company has a rich variety of formulations and original drug products and a perfect structure. As of 22H1, the company has 238 pesticide registration certificates and 7 fertilizer registration certificates, covering a wide range of formulations and raw materials such as pesticides, fungicides, herbicides, etc., as well as water-soluble fertilizers containing amino acids, water-soluble fertilizers with large elements, water-soluble fertilizers with medium elements, water-soluble fertilizers with trace elements and water-soluble fertilizers containing humic acid.
Profit forecasts, valuations and ratings: The company's 22Q3 performance growth was in line with expectations. Considering the steady progress of the company's new production capacity construction, we maintain the company's profit forecast for 22-24, and expect the company's net profit to the mother in 22-24 to be 603/804/991 million yuan respectively. With the orderly development of the company's Hengning project and the Audi project, the company still has good potential for development and maintains its “increase in holdings” rating.
Risk warning: product and raw material prices fluctuate, capacity construction falls short of expectations, downstream demand falls short of expectations