Event: the company released its three-quarter report on October 27, with operating income of 1.044 billion yuan in the third quarter, an increase of 5.24% over the same period last year, and a net profit of 110 million yuan, an increase of 9.90% over the same period last year.
Comments:
Sales volume is growing against the trend, profitability is stable, and performance growth is higher than expected. In terms of sales volume, according to the company announcement, the company achieved sales of 12700 tons in the third quarter of 2023, an increase of 8.23% over the same period last year. We expect to be mainly due to the gradual release of prothiazole production capacity and improved demand in overseas markets such as Brazil. In terms of price, according to the company announcement, the average pesticide sales price of the company in the third quarter of 2023 was 8.03 million yuan / ton, down 2.35% from the same period last year, which was lower than the decline of crude drugs such as imidacloprid. We expect that the main reason is that we have own-brand preparation business and pricing in cooperation with multinational companies is relatively stable. In terms of profitability, the company's gross profit margin in the third quarter was 29.96%, an increase in 2.69pct over the same period last year, and a net profit rate of 10.67%, an increase in 0.46pct compared with the same period last year. We expect that the main reason is the increase in the proportion of high gross profit margin products such as propylthiazole and the decline of crude drugs and thickening preparation performance.
Imidacloprid and other product prices hit bottom and rebound, the performance may continue to improve. According to Baichuan Yingfu, the price of imidacloprid / acetamiprid bottomed out and rebounded. As of October 28, 2023, the price of imidacloprid / acetamiprid was 8.50 (10,000 / ton), respectively, compared with September 18, an increase of 4.44% and 6.25%.
The new production capacity will lay the foundation for growth, and the future growth of agrochemical giants can be expected. The first phase of Hengning has an annual output of 2000 tons of fipronil, 2000 tons of butyl ether urea, 3000 tons of difenoconazole and 2000 tons of propiconazole and its supporting intermediates have been put into production in June 2022. The net profit of Qingdao Hengning subsidiary is-42 million yuan. Looking forward to 2024, the benefit of Hengning Phase I is expected to be further improved, Hengning Phase II products have been landed (the cumulative investment is 2.021 billion yuan), the company's performance center is expected to continue to improve. According to the company's official account, on October 18, Bayer crop Science signed a cooperation agreement with the company, and the two sides announced the establishment of a comprehensive strategic partnership to promote complementary resources at home and abroad. In-depth cooperation in the fields of crude drug cooperation, innovative compound development, product joint registration, pesticide formulation development, product consignment production, exclusive agent of preparations, etc., is conducive to the company's long-term development.
It is estimated that the company's annual return net profit in 23-24-25 will be RMB 653,000,000, covering it for the first time and giving it a "buy" rating.
Risk Tips:
The risk of project putting into production is less than expected; the risk of capacity digestion is not as expected; the risk of deterioration of competition pattern; the risk of exchange rate fluctuation.