Focusing on the main potash industry and moving towards the goal of “world-class potash supplier”, the company acquired 100% of Zhongnong International's shares in 2015 and introduced the potash business. In 2020, the company officially launched its first million-ton potash project. In the same year, it divested the grain trade and shipping business to focus on the main potash business; in 2021, the company's first million-ton potash project was completed and put into operation, and production was completed in late March 2022. With the release of the company's one million tons of potash production capacity, the company's performance improved significantly. In 2022, the company achieved net profit of 2,029 billion yuan, a year-on-year increase of 125.58%, and a compound annual growth rate of 483.34% in 2020-2022. With the strategic goal of building a “world-class potash supplier”, the company strives to achieve 5 million tons/year potash production capacity by 2025; in the future, according to market needs, it will expand to 7-10 million tons/year potash fertilizer production capacity. At the same time, the company attaches importance to investor returns. Under certain conditions, the profit to be distributed cumulatively in cash from 2023 to 2025 will be no less than 30% of the profit that can be distributed in 2023-2025.

There is a mismatch between global potash supply and demand. China is highly dependent on imports of global potash resources, but the distribution is highly uneven. It is mainly concentrated in a few countries such as Canada, Belarus, Russia, etc., with CR3 accounting for 67.5%; the global potash market is oligopolistic, and the pattern is stable for a long time, and the mismatch between supply and demand is obvious. China is a major consumer of potash, but potash resources are relatively scarce, and demand for potash fertilizer is highly dependent on imports. In a situation where domestic potash supply is difficult to increase significantly, and demand for potash fertilizer is increasing steadily, China's dependence on potash imports is expected to maintain a high level in the medium to long term. In order to help China's agricultural development and ensure food security in the long term, developing overseas potash resources has become an important way for China to solve the shortage of potash fertilizer. Laos is currently the country that is currently making the fastest progress in overseas potash development. In recent years, China's potash fertilizer imports and share from Laos have increased rapidly. In 2023, China's potassium chloride imports from Laos were 1.708 million tons, up 181.5% year on year, accounting for 14.8% of China's total potassium chloride imports, up 7.1 percentage points year on year. In the future, as Laos's potash production capacity continues to be released, Laos's ability to feed back domestic market demand will further increase.

The company continues to release million-ton potash projects and actively build a second growth curve. The company is one of the first Chinese companies in China to implement overseas potash development. Currently, it has a total of 263.3 square kilometers of potash mineral rights in Khammouane Province, Laos, with reserves of over 1 billion tons of pure potassium chloride. It is the largest potash resource company in Asia. At present, the company has put into operation two million ton potash projects. The third one million ton project is expected to be completed and put into operation on March 31, 2024, and the company's potash production capacity is expected to expand to 5 million tons/year in 2025. Benefiting from the upgrading of the logistics system in Laos, the company's potash sales network will gradually improve, and the company's influence in the global potash market is expected to continue to increase. In addition, the company established a non-potassium division in 2022 to comprehensively explore the rich associated resources of the company's potash mine in Laos, develop other Lao mineral resources, and plan the layout of various industrial chains such as salt chemicals, bromine chemicals, and coal chemicals. In May 2023, the company's first non-potassium project, the 10,000 tons/year bromine project, was successfully put into operation and completed. The company is now introducing strategic investors to cooperate to develop non-potassium projects. In the future, the company's non-potassium business will have a synergy effect with the main potash fertilizer industry, creating the company's second growth curve.

The investment proposal estimates that the company's revenue for 2023-2025 will be 42.80, 6.268 billion yuan, and 8.646 billion yuan, respectively, with year-on-year changes of 23.49%, 46.44%, and 37.93%; net profit to mother will be 13.93, 18.03 billion yuan, and 2,383 billion yuan, respectively, with year-on-year changes of -31.35%, 29.48%, and 32.16%; earnings per share (EPS) of 1.50, 1.94, 2.57 yuan, and corresponding PE of 15.59, 12.04, and 9.11 respectively. We are optimistic about the long-term growth brought about by the continuous commissioning of the company's million-ton potash project and the expansion of the non-potassium business, and maintain the “recommended” rating.

Risks indicate the risk that the commissioning progress of projects under construction falls short of expectations, the risk that downstream demand falls short of expectations, and the risk of a sharp drop in the price of potassium chloride.