The Q3 performance was in line with expectations. The price of potash fertilizer increased month-on-month in October, and the company's single-day potash production broke another record. The company released the 2023 three-quarter report. The first three quarters achieved revenue of 2,891 billion yuan, +19.81% year-on-year; net profit was 994 million yuan, or -34.54% year-on-year. Among them, Q3 achieved revenue of 869 million yuan, +33.83% year-on-year and -25.55% month-on-month; net profit of the mother was 278 million yuan, -34.20% year-on-year and -26.98% month-on-month. The performance was in line with expectations.

We maintain our profit forecast. It is estimated that the company's net profit for 2023-2025 will be 15.58, 19.53, and 2,222 billion yuan respectively, and EPS will be 1.68, 2.10, and 2.39 yuan/share, respectively. The current stock price corresponding to 2023-2025 PE is 16.8, 13.4, and 11.8 times. Q3 The short-term pressure on the company's revenue and net profit was mainly affected by the month-on-month decline in potash fertilizer prices and weak demand. Since October, potash prices have rebounded month-on-month, and the company's single-day potash production has broken records again. We are optimistic that the company will continue to expand potash production capacity at low cost at the rate of “adding one million tons of potash fertilizer a year”, making steady progress towards the strategic goal of becoming a “world-class potash supplier” and maintaining the “buy” rating.

The average price of the Q3 potash market fell month-on-month, the company's sales volume fell month-on-month, and profitability declined. Profitability in terms of profitability, the company's gross sales margin and net profit margin for the first three quarters of 2023 were 59.95% and 34.09%, respectively, compared to 2022; Q3 gross profit margin and net profit margin were 54.67% and 31.59%, respectively, compared to Q2 -4.59, -0.65pcts. In addition, Q3 management expenses reached 18.8%, +4.2pcts month-on-month, mainly equity payments Pay fees. According to Baichuan Yingfu data, 2023Q3 potassium chloride 60% powder, Qinghai salt lake, and potassium chloride Southeast Asia CFR were 2,466 yuan/ton and 328 US dollars/ton, respectively, -20.0% and -19.9%, respectively; the company's Q3 potash sales volume was 420,000 tons, the average price was about 2,052 yuan/ton, -15.5% and -11.9%, respectively, and the sharp drop in potash prices put pressure on the company's Q3 profitability for a short period of time.

The company's single-day potash production broke another record. Potash fertilizer prices have rebounded since Q4, and are optimistic that Q4 ushered in a sharp rise in volume and price. According to reports on the company's public account, on October 27, the company's single-day potash production in the Dongtai mining area in Laos reached 9116 tons (including 7253 tons of powder potassium and 1,863 tons of granular potassium). On the basis of the 2 million tons/year production line in the Dongtai mining area, the Laos production base achieved a single-day production standard of 3 million tons/year of production capacity. According to Baichuan Yingfu data, the average price of 60% potassium chloride powder in Qinghai Salt Lake and Southeast Asia for potassium chloride in October was 2,678 yuan/ton and 330 US dollars/ton, respectively, +8.6% and +0.7% compared to the Q3 average price; as of November 15, the average price of the potassium chloride market was 2,872 yuan/ton, and market prices were running steadily, and demand in the Northeast region continued to advance; we are optimistic that the company's Q4 will usher in a sharp rise in volume and price.

Risk warning: business environment, policy changes, project construction and commissioning risks, potash price fluctuations, etc.