Brief performance review

On August 23, the company released its 2023 annual report. The company achieved revenue of 1,425 million yuan, +6.14% year-on-year; net profit of 172 million yuan, -3.94% year-on-year; net profit of 95 million yuan after deducting non-return net profit of 195 million yuan, +8.59% year-on-year.

Management analysis

In the context of the declining pesticide cycle, the company's operations are relatively steady. In terms of expenses, in the first half of 2022, the company's sales expenses were 1993 million yuan, +27.23%; management expenses were 9.08 million yuan, +31.34%, mainly due to the corresponding increase in employee remuneration, management depreciation, maintenance expenses, etc., and the lower management expenses of the subsidiary Ning Yitai in the same period last year; financial expenses for the current period - 15.464 million yuan, +81.54% year-on-year, mainly due to the increase in exchange revenue for the current period. R&D expenses for the current period increased by 38.31 million yuan in the previous period, +24.74% over the same period, mainly due to the increase in R&D investment in the current period. Judging from the product price, the main herbicide product, chlorofluoropyroxyacetate, is currently priced at 105,000 yuan/ton, the original price of cyafloxacin drug is 125,000 yuan/ton, the original price of ethylene oxalate is 225,000 yuan/ton, and the original spironite drug is currently priced at 152,000 yuan/ton; the main insecticide product, thiamethylamine, is currently priced at 170,000 yuan/ton.

Most product prices are at historically low quantiles.

There are plenty of projects currently under construction to support the company's future growth. Judging from the information disclosed in the quarterly report, the company currently has fixed assets of 1,608 million yuan and projects under construction are 462 million yuan. We believe that the continuous commissioning and implementation of these projects will help the company to further expand production capacity and enhance profitability.

Profit Forecasts, Valuations, and Ratings

Prices of the company's main products fell, and overseas orders declined. We revised the company's net profit for 2023-2025 to 349 million yuan (-25.9%), 457 million yuan (-21.6%), and 623 million yuan (-18.77%), respectively; EPS was 0.75 yuan, 0.98 yuan, and 1.34 yuan, respectively, and the corresponding PE was 1,328X/10.13X/7.44X, maintaining the purchase rating.

Risk warning

There is a risk of product prices falling, and there is a risk that raw material prices will fluctuate greatly; the progress of new projects falls short of expectations.