Core views
Affected by geopolitical conflicts in 2022, agricultural product prices reached record highs. The company benefited from the high boom in the plant protection industry and achieved a sharp rise in product volume and price. Annual sales reached a new high, achieving revenue of 37.382 billion yuan, an increase of 20.44% over the previous year, and achieving net profit of 609 million yuan, an increase of 287.17% over the previous year. At the same time, the company relies on the Group's global market coverage, registration strength, and diversified and differentiated product supply to consolidate its position as a leading enterprise in the field of generic crop protection.
occurrences
The company released its 2022 annual report
On March 20, 2023, the company released its 2022 annual report. In 2022, the company achieved revenue of 37.382 billion yuan, an increase of 20.44% over the previous year; achieved net profit of 609 million yuan, an increase of 287.17% over the previous year; and achieved net profit of 490 million yuan after deducting the return of the mother, an increase of 529.94% over the previous year. The company's consolidated gross margin in 2022 was 25.14%, up 2.31% year over year. 2022Q4 achieved revenue of 9.304 billion yuan in a single quarter, an increase of 8.82% over the previous year; Guimu's net profit loss was 159 million yuan, a year-on-year decrease of 198.41%.
Brief review
Demand in the plant protection market was strong. The company's annual sales reached a record high. Affected by the Russian-Ukrainian conflict in 2022, commodity supply shortages and food stocks were tight. Agricultural product prices reached a record high in May, and demand for plant protection remained strong throughout the year. Andaomai, a leader in the plant protection industry, grew in line with the market's performance, and sales for the full year of 2022 and EBITDA set new records for the same period in history. Driven by a 16% price increase and a 4% increase in sales volume, Andaama's annual sales reached 5.57 billion US dollars, up 20% in RMB terms, EBITDA reached 740 million US dollars, and increased 14% in RMB terms. The sharp rise in volume and price combined with remarkable results in cost management and control, the company's performance in 2022 reached a new high. It is expected that the plant protection market will gradually return to normal in the second half of 2023, with high inventories and declining farmers' profits that remain high.
Sales increased in most regions, with Brazil and China driving overall business growth. Strong demand in the Brazilian market led Latin America to achieve annual sales of 10.793 billion yuan, an increase of 31.3% over the previous year. Furthermore, sales of Adamac's branded formulation business in China continued to grow well throughout the year. Strong growth in the refined business related to pesticide production in China contributed to a high 34% increase in revenue in the Asia-Pacific region, and the overall contribution rate increased 11.23%. In the rest of the regions, sales in Europe/North America/India, the Middle East and Africa grew 7.6%/16.7%/6.8% year over year (all in RMB). The company is committed to diversified and differentiated product supply. Its business covers more than 100 countries around the world, with sales in emerging markets contributing more than 50%. At the same time, it uses synergies within Syngenta Group to reduce costs and increase efficiency.
The Jingzhou base completed the relocation and project upgrade, and growth resistance was gradually released. The company was affected by the Jingzhou base relocation and project upgrade in the second half of 2021. Production of some products was discontinued, causing a certain loss to the company's revenue. Since 2022, with the relocation of the Jingzhou base and the completion of equipment renovation and upgrading, production at the base has basically achieved high-load operation. With the completion of the Jingzhou base upgrade project in 2023, the Group will continue to focus on promoting the relocation and upgrading of production facilities at the Huai'an base in China over the next year, and will continue to strengthen business and operation capacity building in China.
The acquisition of Agrinova Company complements its business and vigorously expands its overseas presence Adama New Zealand, a subsidiary of Andorra wheat, plans to acquire 100% of the shares of Agrinova New Zealand Limited. The estimated purchase price is RMB 168.87 million. After completion of this acquisition, it is expected to bring a good increase in performance to the company, and the company can fully enjoy Agrinova's registration certificate, existing customer relationships, and GroChem's brand value in the New Zealand market for the company in the New Zealand market Highly complementary biological products, phytonutrients and plant growth regulators markets lay the foundation for business expansion.
Profit forecast and valuation: Considering the company's strong downstream demand for plant protection products, the company is expected to achieve a sharp rise in volume and price in the future, and performance will continue to improve. The company's net profit for 2023, 2024, and 2025 will reach 929 million yuan, 1,114 million yuan, and 1,489 million yuan respectively. The corresponding EPS is 0.4 yuan, 0.48 yuan, and 0.64 yuan respectively. The corresponding PE is 24.6X, 20.5X and 15.3X respectively.
Risk warning: 1. Geopolitical risks. Since 2020, in the context of the COVID-19 pandemic and the Russian-Ukrainian conflict, there are large global geopolitical risks, and future global market demand is uncertain; 2. Market competition intensifies the risk. As crop prices remain high for a long time, the production of global agrochemical suppliers expands further, and there may be a risk of oversupply in the future; 3. There is a risk of production instability. Agrochemical products are used as chemical products, and most of the raw materials used in the company's production are flammable, explosive or toxic substances. The production process involves high-temperature, high-pressure processes, and faces safety and environmental risks; 4. Downstream demand fell short of expectations. Global demand for agrochemical products has remained high in recent years. There may be a risk that crop prices will decline in the future, and industry demand may fall short of expectations.