1H23 performance meets performance forecast
Sirte announced 1H23 results: revenue of 1.718 billion yuan, down 42.57% from the same period last year; net profit of 146 million yuan, corresponding to earnings per share of 0.17 yuan, down 40.2% from the same period last year, in line with the forecast. The decline in performance compared with the same period last year is mainly due to the comprehensive impact of 1H23 on the international market, changes in macroeconomic and market supply and demand, and large fluctuations in raw material prices, as well as the difficult operation of the compound fertilizer industry, intensified competition and falling prices in volume.
The revenue of 1H23 three-yuan compound fertilizer decreased by 39.6% to 857 million yuan compared with the same period last year, and the decline in price reduced the gross profit margin by 1.9ppt to 16.24%; the revenue from monoammonium phosphate decreased by 52.5% to 614 million yuan compared with the same period last year, and the decline in product prices led to a drop in gross profit margin from 18.6ppt to 16.7%; revenue from mineral resources decreased by 3.2% to 125 million yuan compared with the same period last year, benefiting from the high phosphate rock prices, and the gross profit margin increased by 15.9ppt to 60.8% compared with the same period last year.
2Q23 achieved a revenue of 834 million yuan, a decrease of 46.4% and 5.6% compared with the previous month, and a net profit of 55 million yuan, a decrease of 83.7% and 40.2% compared with the same month. The month-on-month decline was mainly due to the seasonal influence of compound fertilizer and the downward price of 2Q compound fertilizer. 2Q23 gross profit margin fell 3.5ppt to 16.8% month-on-month.
Trend of development
The shortage of phosphate rock is highlighted, and the company's phosphate mineral is expected to continue to expand. According to Baichuan information, the current price of phosphate rock (30%) in Guizhou and Hubei is 825-880 yuan per ton, which is still at a historically high level. Up to now, the mining scale of Niwan phosphate rock in Guizhou Road, a wholly owned subsidiary of the company, is 800,000 tons / year, mainly supplying phosphate fertilizer production and some external sales; Yongwen phosphate rock 3 million / annual production capacity (phosphorus comprehensive grade of more than 30%) is under construction. We believe that with the production of supporting projects for new upstream resources such as phosphate rock, the integrity of the company's industrial chain is expected to be further improved, and the profitability of phosphate and compound fertilizer products is expected to be further enhanced.
The company plans to invest 4.5 billion yuan to build a phosphorus-fluorine new material mineralization integrated industrial park project to extend the industrial chain.
The construction contents include 3 million tons / year Yongwen green mine construction and Mingniwan mine construction, 300,000 tons / year wet process phosphoric acid (P2O5), 200,000 tons / year purified phosphoric acid and 100,000 tons / year phosphorus series new energy materials, 20,000 tons / year fluorine series new materials, 200,000 tons / year new high efficiency fertilizer, 900,000 tons / year phosphogypsum filling and its supporting projects. The total investment of the first phase of the project is about 1.73 billion, including 150,000 tons of wet-process phosphoric acid per year, 100,000 tons of purified phosphoric acid per year, 10,000 tons of fluorine salt per year, and the construction of Mingniwan Mine (including mineral processing). The company expects that the annual output value will be about 1.5 billion yuan after the first phase is completed and reached production. We believe that the new project is expected to help the company seize the development opportunities of the new energy industry, give full play to the advantages of high-grade phosphate rock resources, and promote the company's long-term and stable development.
Profit forecast and valuation
Due to the downward price of phosphate and compound fertilizer, we reduced the 24-year net profit of 2023 Universe by 32% to 282 million yuan / 348 million yuan. The current stock price maintains the "outperform industry" rating corresponding to 2023 Universe's 24-year price-to-earnings ratio of 19.9 to 16.1. Due to the downgrade of earnings forecast but taking into account the contribution of new investment to long-term growth, we have lowered our target price by 10.5% to 7.7 yuan, corresponding to 23.3 times 2023 and 18.9 times 2024 price-to-earnings ratio, which is 17.4% higher than the current stock price.
Risk
The price of phosphate rock has dropped sharply, the sales volume of compound fertilizer is not as expected, and the progress of phosphate rock production is not as expected.