The Zhitong Finance App learned that Anxin International released a research report stating that it maintains the “buy” rating of China Heart Link Chemical Fertilizer (01866), is optimistic about future company development, continuously optimizes the sales structure, and increases prices and profit margins. The estimated net profit for 2024-2026 is $1.3 billion, $1.71 billion and $2.26 billion, with a target price of HK$6.5 billion. In 2023, the company's revenue reached 23.48 billion, and net profit to mother was 1.19 billion yuan, a year-on-year decrease of 11%. The performance was in line with expectations. The decline in gross margin and net profit margin was mainly due to falling prices of chemical products, such as liquid ammonia, melamine, methanol, etc., with low profit margins, which dragged down overall performance.

The bank believes that in 2024, the urea supply and demand structure was relatively balanced, and supply-side urea production capacity increased slightly. According to Zhuochuang information, domestic urea production capacity reached 75 million tons in 23, and is expected to reach 78 million tons in 2025. On the demand side, downstream demand is dominated by steady growth in agricultural use. Agricultural demand accounts for about 70% of the entire downstream urea. In recent years, prices of major food crops, such as corn, soybeans, wheat, and rice, in both the Chinese and international markets have been higher than the historical average, and farmers' planting profits have increased. The bank believes that urea exports will have an obvious phased impact on the domestic market, and are also the biggest variable in urea supply and demand. Since March, there have been many rumors about urea export policy. The Nitrogen Fertilizer Association refuted the rumor. The export policy should be based on market conditions, such as large price fluctuations, which have an impact on the country, and it is impossible to relax the export policy.

According to the report, exports are an important method and means of regulating domestic urea supply and demand. Since November '23, domestic urea export laws and regulations have been strictly enforced in order to guarantee domestic supply, and almost all of China's urea exports have been halted. The Chinese government has interfered with the import and export of urea through a number of measures. As a result, the share of China's urea exports in production has declined year by year in the past ten years, falling from 20% in 2014 to 5% in 2022, continuously reaching new lows. The bank believes that during the spring farming insurance and supply phase, it will be difficult to change the export policy, and the export policy may be adjusted until May.