Introduction to this report:
The company's fourth quarter performance recovered significantly. On the one hand, product profitability continued to increase due to the gradual recovery in the agrochemical sector market, and on the other hand, the company's specialty chemicals sector provided stable performance contributions.
Key points of investment:
Maintain an “Overweight” rating. The fourth quarter was accompanied by a recovery in the agrochemical sector and a recovery in phosphate ore prices, and the company's performance recovered markedly from month to month. According to the updated profit forecast, the 2023-2025 EPS is expected to be 1.28, 1.63, and 2.00 yuan, respectively (previously 1.25, 1.60, and 1.97 yuan, respectively).
Comparatively, the average PE of the company in 2024 was 9.5 times. Based on the extension of the company's industrial chain, it has a high barrier. The target price corresponding to a 30% valuation premium is 20.09 yuan, which is equivalent to 12.3 times PE.
The results slightly exceeded market expectations. According to the company's announcement, net profit due to mother is expected to be 1,360-1,460 billion yuan in 2023, a year-on-year decrease of 75.05%-76.76%. Among them, the fourth quarter achieved net profit of 426-526 million yuan, a year-on-year decrease of 44.04%-54.68%, and an increase of 31.08%-61.85% month-on-month. The obvious month-on-month recovery in the fourth quarter was mainly due to a recovery in the agrochemical sector market on the one hand, and a return to the upward path of phosphate ore prices in the fourth quarter.
New material projects will be expanded one after another in 2024. In the context of the gradual enrichment of phosphorus and silicon product systems, the company continues to cultivate at both ends of the industrial chain. The upstream phosphate ore end has reserved multiple prospecting and mining rights, and the downstream new materials and new energy products will be put into production one after another in 2024. According to the November 2023 Investor Relations Schedule, the first phase of microcapsules has already been put into operation; in addition, according to the Aibang Aerogel Forum official account, the 5000 m3/year aerogel felt project was successfully tested on January 18, 2024.
Glyphosate and phosphate ore prices are running steadily. Since the third quarter, the glyphosate market has recovered along with a boost in overseas demand. Phosphate ore prices have returned to a high level driven by downstream demand for phosphate fertilizer and iron phosphate. Looking ahead to the first quarter, we believe glyphosate and phosphate prices will continue to operate steadily.
Risk warning: Overseas demand for glyphosate is weakening, and project construction progress falls short of expectations