Incident: The company released its 2023 semi-annual report. During the reporting period, it achieved revenue of 2,663 million yuan (-5.24% YoY) and net profit of 331 million yuan (+0.47% YoY).
Product production and sales increased simultaneously, and prothioconazole provided effective support: the company is mainly engaged in R&D, production and sales of pesticide formulations, pesticide intermediates, pesticide raw materials and water-soluble fertilizers. The main original pharmaceutical products include insecticide series and fungicide series. The company operated steadily during the reporting period, and achieved an increase in production and sales volume against the backdrop of a decline in the pesticide industry and a decline in pesticide prices, offsetting some of the adverse effects. According to the company announcement, 2023H1 achieved pesticide product production of 31,500 tons, +22.65%, sales volume of 32,800 tons, +17.42% over the same period. In addition, the company's superior product, prothionazole, achieved an increase in revenue share during the reporting period, thus helping the company achieve an increase in gross margin. According to the company announcement, 2023H1's gross margin reached 31.55%, compared to 31.55%. The gross margin was +5.10 pct in 2022, which helped increase the company's net profit. At the same time, according to the company's announcement, during the reporting period, the company optimized the production line, updated some of the original products, increased the added value of the products, and contributed to the improvement of the company's profitability. In the future, as the pesticide industry recovers and construction projects are gradually implemented, the company's profitability is expected to gradually show.
Projects under construction continue to advance, and overseas layout is gradually improving: In recent years, the company has continued to carry out diversified product layouts and scale expansion. According to the company announcement, construction of the second phase of the Qingdao Hengning Biotechnology Co., Ltd. project began in 2022. Some of these projects will be completed in 2023. In the future, as related projects gradually advance, the company's product layout is expected to be further improved. In addition, the company is actively expanding overseas. According to the company's announcement, the company has now obtained registration documents for more than 1,900 products from dozens of countries including Paraguay, Egypt, Kenya, Thailand, and Pakistan. It is also supporting registration in more than 90 countries including Colombia, Dominica, and Serbia, and has carried out independent registration in 14 regions including the European Union, the United States, Canada, and Brazil. Furthermore, the company has completed the establishment of companies such as Hailier Brazil, Hailier Philippines, Hailier Cambodia, and Hailier Argentina. The gradual improvement of the global layout is expected to achieve a rapid increase in profitability.
Investment advice: We expect the company's net profit from 2023 to 2025 to be 681 million yuan, 902 million yuan, and 1.16 billion yuan respectively. We will give 10xPE in 2023, a target price of 20.0 yuan, and maintain the buy-A investment rating.
Risk warning: The implementation of projects under construction fell short of expectations; the macro environment fell short of expectations.