Introduction to this report:
The company's 2023 annual report is in line with market expectations. Against the backdrop of a rapid decline in the pesticide boom, the company's profitability showed strong resilience.
Key points of investment:
Maintain an “Overweight” rating. Based on the consolidation of low pesticide prices, we updated the profit forecast. The 2024-2025 EPS forecast is 4.21 yuan and 4.63 yuan respectively (previously 4.62 yuan and 5.35 yuan, respectively), and the 2026 EPS forecast was 5.40 yuan, and the target price for 2024 was updated to 79.91 yuan, corresponding to 19.1 times the average valuation level of comparable companies, maintaining the “increase” rating.
The 2023 annual report is in line with expectations. In 2023, we achieved operating income of 11.478 billion yuan, a year-on-year decrease of 27.41%, and realized net profit of 1,565 billion yuan, a year-on-year decrease of 12.77%. Among them, revenue for the fourth quarter was 2.04 billion yuan, which was basically the same; net profit to mother was 204 million yuan, a decrease of 13.92% over the previous quarter. Weighted ROE in 2023 was 17.26%, down 5.92 pcts year on year, gross profit margin of 25.60% decreased slightly by 0.08 pcts year on year, and net profit margin 13.65% increased 2.29 pcts year over year. The full year balance ratio was 38.37%, down 3.91 pcts year over year.
The fall in the price of original drugs showed that gross margin was resilient, and market share expanded against the trend. Prices for the company's major products all showed a downward trend in 2023. However, along with the release of the fourth phase of Youjia and the expansion of the company's market side, sales of original drugs in 2023 increased 10.43% year over year, and pharmaceutical sales of 35,700 tons increased 2.36% year on year. Against the backdrop of falling prices of original drugs, the company's gross margin was resilient, while net interest rates bucked the trend in measures to reduce costs and increase efficiency.
The pesticide supply and demand pattern was weakened, and Youchuang projects continued to grow. In 2024, along with the continued elimination of overseas pesticide stocks, some low pesticide prices rebounded. As the company's process and cost advantage, methrin has high barriers to competition, so there is also room for price repair. The promotion of the Youchuang base in Liaoning is expected to open up the growth curve once again.
Risk warning: pesticide prices continue to fall, project construction progress falls short of expectations