The company released the third quarterly report of 2023, and the performance basically met expectations. During the reporting period, the company realized revenue of 3.707 billion yuan (YoY-3%), net profit of 442 million yuan (YoY+3%) and net profit of 476 million yuan (YoY-1%). In the first three quarters, the gross profit margin of the company's sales was 31.10%, up 3.88pct year-on-year, and the net profit margin was 11.93%, up 0.61pct year-on-year. Among them, 23Q3 realized revenue of 1.044 billion yuan (YoY+5%, QoQ-27%) in a single quarter, realized net profit of 111 million yuan (YoY+10%, QoQ-38%), and the performance basically met expectations. The gross profit margin of sales in Q3 was 29.96%, with month-on-month changes of +2.69pct and-0pct respectively, and the net interest rate was 10.67%, with month-on-month changes of +0.45pct and-1.79pct respectively. In terms of expenses, sales, management, finance and R & D expenses increased by 6.76pct to 17.36% in Q3.
23Q3 Traditional off-season production and sales decline, core product prothioconazole stable company performance. During the reporting period, the company's pesticide business realized revenue of 3.625 billion yuan (YoY-3%), sales volume of 45,500 tons (YoY+15%), and average price excluding tax of 79,600 yuan/ton (YoY-15%). Meanwhile, the prices of main raw materials liquid chlorine, monomethylamine fine products, DMF, acrylonitrile and toluene changed by-63%,-63%,-59%,-20% and-5% year-on-year respectively. The improvement of cost end brought certain support to the company's profits. Among them, in Q3 of 23, the price of traditional off-season superimposed products still declined month-on-month. The company's pesticide business realized revenue of 1.02 billion yuan (QoQ-27%), sales volume of 12,700 tons (QoQ-31%), and average price excluding tax of 80,300 yuan/ton (QoQ+6.4%). The month-on-month increase of average sales price was mainly due to the change of product structure. Q3 of domestic preparation business ushered in off-season, and at the same time, the sales proportion of high-priced products such as prothioconazole increased. The company has formed stable cooperation relationship with multinational companies. The new production capacity of Shandong base has been digested smoothly, and the price is more advantageous than the average market price, which stabilizes the company's performance to a certain extent. In addition, Hengning Phase I bufenuron, difenoconazole, chlorfenapyr and other new products have also been started for six times, and it is expected to gradually realize profits in the future. According to World Agrochemical Network, on October 18, the company signed a cooperation agreement with Bayer CropScience, and both parties announced the establishment of a comprehensive strategic partnership. The company further binds to global agrochemical giants, and the future can be expected.
Continue to add prothioconazole to meet the needs of multinational companies, promote the construction of Hengning base in an orderly manner, and open up growth space for new production capacity + new products. At present, the company has a design production capacity of 5000 tons of prothioconazole (Shandong Hailier 3000 tons project entered trial production in December 2022), Qingdao Hengning Phase II planning 10000 tons of prothioconazole (8000 tons before change), the total production capacity of future products will reach 15,000 tons, by virtue of first-mover advantage, scale advantage, and cost advantage brought by continuous technological transformation, the company has stabilized the leading position of prothioconazole in China. In order to better guarantee the continuous development of the company's technical drugs and intermediates, the company announced the changes of Hengning Phase II project on April 28,2023, and planned to eliminate azoxystrobin, boscalid and other raw materials and α-acetyl-γ-butyrolactone and other intermediates, increase the production capacity of pymetrozine, chlorantraniliprole, prothiophanate-methyl and other raw materials and some intermediates in the original project, and add new production capacity of pyracloprid, fluchlorantraniliprole and 2,3-dichloropyridine.
With the continuous progress of the project, new products will be launched one after another in the next two years, injecting new momentum into the company's growth.
Investment analysis opinion: Considering the price decline of the company's core product prothioconazole, it still takes time for Hengning Base to achieve profitability, and the company's net profit forecast for 2023-2025 is lowered to 606 million yuan, 727 million yuan and 959 million yuan.(The original value is 7.36 billion yuan, 8.84 billion yuan and 1.118 billion yuan). The PE corresponding to the current market value is 10,8 and 6X respectively. The average PE of comparable companies Lier Chemical and Wind of Zhongqi shares is expected to be 11X in 2023, maintaining the rating of "overweight".
Risk warning: 1) the construction progress of new projects is less than expected;2) the prices of major products have fallen sharply;3) the prices of raw materials have fluctuated greatly.