occurrences
Hubei Yihua disclosed the 2023 third quarter report. The company achieved operating income of 13.703 billion yuan in the first three quarters of 2023, a year-on-year decrease of 15.26%; realized net profit of 390 million yuan, a year-on-year decrease of 81.87%; 2023Q3 achieved revenue of 4.607 billion yuan, a year-on-year decrease of 8.87%, an increase of 5.25% over the previous year, and realized net profit of 138 million yuan, a year-on-year decrease of 71.66% and an increase of 331.3% over the previous year.
Prices of 2023Q3's main products picked up, and performance improved significantly month-on-month. Phosphate fertilizer and urea entered a low consumption season in the second quarter of 2023. Product prices fell, downstream procurement was insufficient, PVC was affected by weak real estate demand, and the industry was generally in a state of loss, and the company's performance was under pressure. Prices of 2023Q3's main products have gradually rebounded, and fertilizer use in autumn has led to an increase in procurement volume. According to Baichuan Yingfu data, the average prices of 2023Q3 diammonium phosphate, urea, and PVC were 3446.38 yuan/ton, 2404.19 yuan/ton, and 5896.88 yuan/ton, respectively -2.99%, 5.08%, and 4.56% year-on-year, -14.04%, -2.77%, and -8.57%, respectively. In terms of price, it can be seen that the price of diammonium phosphate has declined slightly month-on-month, both urea and PVC prices have risen, urea profitability has improved, and PVC losses have narrowed. The sales rate, management fee rate, financial fee rate, and R&D fee rate for the first three quarters of 2023 were 0.61%, 3.14%, 0.93%, and 4.07% respectively, compared with +0.23pct, +1.27pct, -0.19pct, and +0.5pct, respectively. The increase in management expenses was mainly affected by device parking.
The fixed increase project is launched, and production costs will be further reduced
In July of this year, the company launched a fixed increase project, issuing 160 million shares to 12 specific targets, raising a total of 1,584 billion yuan in capital. The project mainly includes 460,000 tons/year of liquid ammonia and 90,000 tons/year of methanol.
Liquid ammonia is one of the raw materials of diammonium phosphate and urea. The implementation of this project will greatly reduce the production cost of the company's products.
The phosphate ore project continues to advance. The iron phosphate project is expected to land this year. The company's 1.5 million tons/year phosphate mining license is being processed. Currently, phosphate ore prices are still relatively high. In the future, with the implementation of the phosphate ore project, the company's phosphate ore self-sufficiency rate will increase significantly, and the company's production costs will continue to drop. Projects such as 300,000 tons/year of iron phosphate and 200,000 tons/year of nickel sulfate in cooperation between the company and Ningde Times subsidiary are expected to be put into operation before the end of the year. Relying on the advantages of technology and channels, the project is expected to bring considerable investment returns to the company.
Investment suggestions: We expect the company's net profit from 2023-2025 to be 6.59/826/1,034 million yuan, EPS of 0.62/0.78/0.98 yuan, and corresponding PE of 16/13/10 times respectively, maintaining the “buy” rating.
Risk warning: The price of chemical fertilizers has fallen, and the commissioning of new projects falls short of expectations.