The company achieved revenue and net profit of $8.318 billion and net profit of $325 million respectively in 23Q3, with year-on-year differences of +10.07% and -74.21%, respectively. There were improvements over the previous month, +18.18% and +104.20% respectively. The company's fertilizer sales in the third quarter rose 18.26% month-on-month to 1,031 billion yuan, and the gross profit of glyphosate and phosphate ore improved month-on-month.
Phosphate ore prices may remain stable in the fourth quarter. Combined with demand for winter storage of agrochemical products and overseas storage, it can provide support for fertilizer and glyphosate prices. The company's new materials sector project is progressing smoothly. The 100,000 tons/year iron phosphate project has been put into operation, and 2 million tons/year phosphate ore processing and pipeline transportation projects are progressing steadily. We are optimistic about the company's long-term layout and profitability in the fields of agrochemicals, integrated circuits, and new energy batteries, etc., based on the advantages of phosphate ore resources. Considering the sharp decline in the prices of the company's main products over the same period last year, we adjusted the company's net profit forecast for 2023-2025 to 14.41/21.84/2,560 billion yuan (the original forecast was 3717/42.63/4.473 billion yuan), adjusted the target price to 25 yuan, and maintained the “buy” rating.
The company's performance has improved, with revenue and net profit of +18.18% and +104.20% month-on-month. According to the company announcement, the company achieved revenue and net profit of $8.318 billion and net profit of $325 million in 23Q3, respectively, with a year-on-year difference of +10.07% and -74.21%, respectively. There was a month-on-month improvement of +18.18% and +104.20%, respectively. The company's 23Q3 sales margin was 12.61%, -19.84pcts year-on-year and +1.53 pcts month-on-month. The main reason for the month-on-month increase in performance was the month-on-month increase in fertilizer sales, and the gross profit of glyphosate improved significantly month-on-month.
Fertilizer sales in the third quarter were +18.26% month-on-month, and glyphosate profit improved significantly. According to the company's announcement, 23Q3 fertilizer and glyphosate sales were 41.1 million tons and 40,400 tons, respectively, +58.02% and -22.01%. The price per ton was -25.16% and -1.28% month-on-month, respectively. Among them, the company's fertilizer sales rose 18.26% month-on-month to 1,031 billion yuan. According to Baichuan Yingfu, 23Q3 glyphosate gross profit increased 99.44% month-on-month to 7381.91 yuan/ton. We roughly estimate that the company's glyphosate series gross profit increased +53.56% month-on-month. We expect the fourth quarter to arrive with stable demand for chemical fertilizer winter storage and the superposition cycle of overseas glyphosate and ammonium phosphate, and the recovery trend in the company's performance is expected to continue.
The gross profit of phosphate ore bottomed out and rebounded, and is expected to maintain a high level of operation in the fourth quarter. According to the company's announcement, the sales volume of yellow phosphorus and phosphate ore in 23Q3 was 0.52 and 634,200 tons, respectively, +6.12% and +13.09%. The price per ton was +10.12% and +8.80%, respectively. 23Q3 sales accounted for 2.79% and 9.49%, respectively. According to Baichuan Yingfu, 23Q3 phosphate ore gross profit was 393.91 yuan/ton, down 24.19% from the previous month, which is one of the reasons affecting the company's gross profit in the third quarter. As of October 30, the price of 30% grade phosphate ore has gradually risen to 972 yuan/ton since the end of August, and gross profit has increased to 480 yuan/ton. We expect phosphate ore prices to remain high in the fourth quarter due to tight supply, which can provide some cost support for downstream yellow phosphorus, phosphate fertilizer, and glyphosate prices.
The ferric phosphate project was put into operation, and projects in various fields progressed steadily. According to the company's announcement, the first phase of 100,000 tons/year iron phosphate was officially put into operation in September, and production capacity is currently climbing. In addition, the company is steadily advancing project construction, including 2 million tons of phosphate ore processing, 20,000 tons/year 2,4-D, and 60,000 tons/year of ultra-high purity electronic grade chemicals for chips. The comprehensive layout on the raw materials side and product side can create a stable profit growth point for the company.
Risk factors: demand falls short of expectations; operating rate falls short of expectations; risk of large price fluctuations; projects under construction are progressing less than expected.
Profit forecast, valuation and rating: We are optimistic about the company's long-term layout and profitability in the fields of agrochemistry, integrated circuits, and new energy batteries, etc., based on the advantages of phosphate resources, combined with the development concepts of “integrated mining and electrification”, “phosphorus-silicate collaboration” and “integration of mineral fertilizer”. Considering the sharp year-on-year decline in the prices of the company's main products, which are currently in a recovery period, we lowered the company's net profit forecast for 2023-2025 to 14.41/21.84/2,560 billion yuan (the original forecast was 37.17/42.63/4.473 billion yuan), corresponding to EPS of 1.30/1.96/2.30 yuan, respectively. We forecast the net profit of the company's phosphorus chemical sector in 2023 to be 1.07 billion yuan. Referring to the phosphate fertilizer and phosphorus chemicals (CITIC) index for the company's 2023 11xPE, corresponding to the market value of 11.8 billion yuan; predicting the net profit of the company's new materials and other sectors in 2023, referring to the electronic chemicals (CITIC) index of 45xPE in 2023, considering that the company mainly uses wet electronic chemicals, we give the company a valuation of 41XPE in 2023, corresponding to a market value of 15.2 billion yuan; the total forecast is that the company's reasonable market value is about 27 billion yuan. The corresponding company is 19xPE in 2023. We lowered our target price to $25 (originally $44) to maintain our “buy” rating.