The net profit of 2023Q3 after deducting non-net profit was 282 million yuan, a year-on-year decrease of 32.54%. In 2023Q3, the company achieved operating income of 869 million yuan, a year-on-year decrease of 25.55%, a year-on-year increase of 33.83%; net profit of 278 million yuan, a decrease of 26.98%, a year-on-year decrease of 34.20%; net profit after deduction of 282 million yuan, a decrease of 27.30% over the previous year and a decrease of 32.54% year-on-year. The first three quarters of 2023 achieved operating income 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%; net profit after deducting non-net profit of 1,006 billion yuan, a year-on-year decrease of 33.39%. The company's 2023Q3 sales margin was 54.67%, down 4.59pct from month on month, down 22.29pct year on year; net sales profit margin was 31.59%, down 0.65pct month on month, down 33.24pct year on year.

Potassium chloride prices have steadily rebounded. According to Zhuochuang Information, as of November 3, 2023, the reference price of potassium chloride products was 2,925 yuan/ton, which was flat month-on-month. Compared with 2358.33 yuan/ton on July 27, 2023, the average weekly price was 2,916 yuan/ton, up 0.9% from week to week, the average monthly price was 2918.89 yuan/ton, up 2.68% month on month. According to Baichuan Yingfu, as of November 5, 2023, the price of potassium chloride in Southeast Asia was 330 US dollars/ton, up 10 US dollars/ton from 320 US dollars/ton on August 24, 2023.

Production capacity construction is progressing smoothly, and daily output has reached a new high. The company produced 1.1767 million tons of potassium chloride and sold 1.1901 million tons of potassium chloride in the first three quarters of 2023; of these, the company produced 414,900 tons of potassium chloride and sold 423,600 tons of potassium chloride in the third quarter.

In terms of capacity building, on the basis of the smooth production of the first 1 million tons/year potash project, the company successfully selected the factory for the second 1 million tons/year potash fertilizer project and put it into trial operation in January 2023. The third 1 million tons/year potash fertilizer project aims to be completed and put into operation by the end of this year, and will strive to achieve 5 million tons/year potash fertilizer production capacity by 2025. In the future, it will expand to 7 to 10 million tons/year of potash fertilizer production capacity according to market demand. According to WIND, on October 27, 2023, the company's single-day potash production in the Dongtai mining area in Laos had achieved 9116 tons (including 7253 tons of powdered potassium and 1,863 tons of granular potassium), once again setting a new record for the highest daily output.

The non-potassium sector began a second growth curve. The company's potash mine is associated with a variety of scarce and scarce resources, including bromine, lithium, magnesium, rubidium, iodine, cesium, boron, etc. In May 2023, the company's first non-potassium project, a bromine project with an annual output of 10,000 tons, was successfully put into operation and reached production, filling the gap in bromine production overseas by Chinese enterprises. With the increase in the production capacity of its main business, potash fertilizer, the company will achieve a bromide production capacity of 50,000 to 10,000 tons and multiple new bromine-based materials product lines in the future, building a global bromine-based new materials industry base. At the same time, in the future, the company will also rely on Laos's rich mineral resource advantages to further explore and develop mineral resources including gold, copper, coal mines, and bauxite.

Earnings forecasts and ratings. We expect the company's net profit for 2023-2025 to be 1,551, 24.45 and 3,074 billion yuan respectively, corresponding to EPS of 1.67, 2.63, and 3.31 yuan, respectively. Due to the company's recent rapid expansion in production capacity and being the largest potash resource reserve enterprise in Asia, we gave the company 13 times PE in 2024, corresponding to a target price of 34.19 yuan (previous target price of 34.19 yuan, based on 13 times PE in 24 years, maintenance); maintaining the “superior to market” rating.

Risk warning: Project construction progress falls short of expectations, safety and environmental risks, macroeconomic downturn.