Event: The company released its 2023 three-quarter report. The first three quarters of 2023 achieved revenue of 2,881 billion yuan, a year-on-year increase of 19.81%, net profit of 994 million yuan, a year-on-year decrease of 34.54%, and non-net profit of 1,006 billion yuan, a year-on-year decrease of 33.39%; Q3 achieved revenue of 869 million yuan, a year-on-year increase of 33.83%, and net profit of 278 million yuan, a year-on-year decrease of 34.20%.

The average price of potash in Q3 declined month-on-month, and Q3 performance declined month-on-month. According to Baichuan Yingfu, the average market price of 2023Q3 potassium chloride was 2,524 yuan/ton, down 10.08% month-on-month. 2023Q3 was affected by the month-on-month decline in the average price of potassium chloride. The company's third-quarter performance declined month-on-month. The Q3 gross profit margin was 54.67%, and the net profit margin was 31.59%, down 4.59 and 0.65 pct, respectively. In terms of production, on October 27, the company's single-day potash production in the Dongtai mining area in Laos reached 9116 tons. On the basis of the 2 million tons/year production line in the Dongtai mining area, the company achieved a breakthrough in the single-day production standard of 3 million tons/year, marking that the company has entered the ranks of world-class potash fertilizer suppliers and is the third largest potash supplier in Asia. In the future, the company hopes to increase its daily production by 10% to 9900 tons. It strives to achieve the phased target of “5 million tons/year by 2025”.

Demand for winter storage and fertilizer preparation for spring farming has arrived, and the price of potash fertilizer has risen slightly. Since mid-July, potash prices have bottomed out and rebounded, rising from 2,294 yuan/ton in mid-July to 2,872 yuan/ton at the end of August due to factors such as rising demand for potash fertilizer due to rising demand for potash fertilizer due to the increase in demand for potash fertilizer, increasing from mid-July to 2,872 yuan/ton at the end of August; since the end of August, demand for potash fertilizer in the northeast market in Brazil has not advanced significantly, and potash prices have gradually moved sideways; recently, the country has gradually entered winter fertilizer storage and spring farming. At this stage, the price of potash fertilizer rose slightly. According to Baichuan Yingfu, Currently, the average price of the domestic potash market is 2,842 yuan/ton, up 5.02% from 2,706 yuan/ton in mid-October. The domestic potash port raised the price of 2600-2700 yuan/ton. In November, the official arrival price of 60% crystals in Qinghai Salt Lake in China increased by 100 yuan/ton to 2,760 yuan/ton; international potash prices are relatively stable, with red granular potassium in Southeast Asia being 390-430 US dollars/ton CFR, powder potassium is 330-360 US dollars/tonne.

The company is the main source for the increase in global potash production capacity in the next few years, and plans to expand production are progressing steadily. On the supply side, Nutrien announced production cuts and indefinitely extended plans to add 3 million tons/year of production capacity; BHP Billiton's Jansen mine project in Canada has now completed 32% and is expected to go online by the end of 2026. In terms of demand, Russia's termination of the Black Sea agreement has led to a rise in food prices and increased farmers' willingness to use potash fertilizer; the Arab-Israeli conflict has raised market concerns about Israel's potash supply, but at present, ICL operations and loading at Ashdod Port have not been affected, so we can continue to focus on the follow-up situation; domestic demand for winter storage and fertilizer preparation for spring farming is coming, providing effective support for potash prices. On October 17, the company and the Ministry of Planning and Investment signed a memorandum of understanding on framework development for the 5 million tons/year potash capacity expansion project in Khammong Province, Laos, to provide support for the implementation of the company's potash fertilizer project. The company's third million ton project is scheduled to be completed and put into operation by the end of 23. The potash production capacity will increase to 5 million tons in the medium term and 7 to 10 million tons in the long term.

Maintain a “Highly Recommended” investment rating. Revenue for 2023-2025 is estimated to be 41.5 billion, 60.5, and 7.74 billion yuan, respectively, and net profit of 15.1, 23.6, and 2.96 billion yuan respectively. The current stock price corresponding to PE is 17.5, 11.2, and 9.0 times, respectively, maintaining the “highly recommended” rating.

Risk warning: Product prices and agricultural product prices have fallen sharply, and the commissioning of new production capacity falls short of expectations.