Incidents:
On April 2, 2024, Xingfa Group released its 2023 annual report: in 2023, the company achieved operating income of 28.105 billion yuan, a year-on-year decrease of 7.28%; realized net profit attributable to shareholders of listed companies of 1,379 billion yuan, a year-on-year decrease of 76.44%; and a weighted average return on net assets was 6.73%, down 28.03 percentage points from the previous year. Gross profit margin was 16.17%, down 19.44 percentage points year on year; net sales margin was 4.93%, down 17.49 percentage points year on year.
Among them, the company achieved revenue of 6.178 billion yuan in 2023Q4, +13.27% year-on-year, -25.73%; realized net profit of 445 million yuan, -52.69% year-on-year, +36.85% month-on-month; ROE was 2.18%, a year-on-year decrease of 2.58 percentage points, and an increase of 0.56 percentage points month-on-month. The gross profit margin on sales was 26.89%, down 5.40 percentage points year on year, up 14.28 percentage points from month to month; net sales margin was 6.61%, down 11.24 percentage points year on year, and up 2.43 percentage points from month to month.
Investment highlights:
Prices of products such as glyphosate and silicone declined, and the 2023 performance was affected by macroeconomic and market supply and demand changes. Market sentiment in the company's agrochemical sector and silicone sector declined markedly, and sales prices of products such as glyphosate raw materials and silicone DMC declined to varying degrees, leading to a marked decline in the sector's profit level. In 2023, the company's fertilizer sector achieved sales volume of 1,2397 million tons, +22.55% year-on-year, revenue of 3.06 billion yuan, +4.59% year-on-year, gross profit margin 8.70%, a year-on-year decrease of 10.38 percentage points; glyphosate series products achieved sales volume of 171,400 tons, +10.58% year-on-year, revenue of 4.283 billion yuan, -50.60% year-on-year, gross profit margin of 31.01%, a year-on-year decrease of 27.08 percentage points; silicone series products achieved sales volume of 18.73 million tons, -15.55% year-on-year, revenue 2.144 billion yuan, a gross profit margin of 4.33%, a year-on-year decrease of 13.16 percentage points; specialty chemicals achieved sales volume of 449,400 tons, +12.94% year-on-year, revenue of 5,028 billion yuan, -19.26%, gross profit margin 20.75%, a year-on-year decrease of 17.50 percentage points; mining mining achieved revenue of 1,603 billion yuan, +87.36% year-on-year, gross profit margin 73.74%, a year-on-year decrease of 0.19 percentage points.
In terms of period expenses, the company's sales/management/R&D/finance expenses rate in 2023 was 1.29%/1.67%/3.97%/1.12%, respectively, +0.16/+0.08/-0.10/+0.08pct.
In 2023, the net cash flow from the company's operating activities was 1,453 billion yuan, a year-on-year decrease of 78.89%, mainly due to lower product prices and reduced cash recovered from sales.
2023Q4 gross profit continued to recover month-on-month, with asset impairment losses affecting performance 2023Q4. The company achieved operating income of 6.178 billion yuan, +724 billion yuan, and 2.140 billion yuan month-on-month; realized gross profit of 1,662 billion yuan, year-on-year -99 billion yuan, and +613 million yuan month-on-month; realized net profit of 445 million yuan, year-on-year -495 million yuan, and +120 million yuan month-on-month. The reason for the month-on-month increase in the company's 2023Q4 gross profit was that the price difference of the main products, phosphate ore, fertilizer, silicone, etc. increased by varying degrees in the fourth quarter. According to Wind data, 2023Q4, the average price of phosphate ore was 984 yuan/ton, -5.57%, +9.95% month-on-month; the average price of monoammonium phosphate was 3,292 yuan/ton, +4.00% YoY, +17.93% month-on-month, 832 yuan/ton, +64.06% YoY, +37.67% month-on-month; the average price of diammonium phosphate was 3,923 yuan/ton, +6.11% month-on-month, 902 yuan/ton, +68.91%, -10.22% month-on-month%.
In terms of period expenses, the company's sales/management/R&D/finance expenses for 2023Q4 were 0.99/2.24/3.6/ 0.84 billion yuan respectively, compared to +0.45/+0.01/+0.75 billion yuan year-on-year, and -0.20/+1.22/+1.24/+0.14 billion yuan compared to the previous month. 2023Q4's asset impairment losses were $341 million, +240 million yuan year on year, and +348 million yuan month on month, mainly due to falling inventory prices and fixed asset impairment losses; 2023Q4's net investment income was -10 billion yuan, -36 million yuan, and -73 million yuan month-on-month.
According to Wind, the average price of 2024Q1 phosphate ore was 1009 yuan/ton, -4.65%, +2.59%; the average price of monoammonium phosphate was 3074 yuan/ton, -6.32% YoY, -6.63% month-on-month, the price difference was 724 yuan/ton, +7.47% YoY, -13.01% month-on-month; the average price of diammonium phosphate was 3895 yuan/ton, -0.71% month-on-month; the price difference was 1030 yuan/ton, +22.10%, month-on-month +14.18%; glyphosate +14.18%; The price is 25,872 yuan/ton , 42.33% YoY, -10.70% month-on-month, price difference was 1,1295 yuan/ton, YoY -58.96%, and -16.53% month-on-month; the average price of silicone was 15,544 yuan/ton, -8.58% YoY, +7.92% month-on-month, and the price difference was 3,774 yuan/ton, +97.15% YoY and +42.16% month-on-month. The price differences of the company's main products such as fertilizer and silicone have been repaired. At the same time, new material products such as wet electronic chemicals, photovoltaic adhesives, microcapsules, aerogel felt, and phosphating agents have been put into operation one after another in 2023, cultivating new profit growth points for the company, and the company's performance is expected to continue to recover.
Projects under construction progressed in an orderly manner, and the new materials business brought new profit growth points. In 2023, the company's subsidiary Xingfu Electronics' 30,000 tons/year electronic-grade phosphoric acid and 20,000 tons/year electronic-grade etching solution projects were completed and put into operation, and the company's comprehensive strength in the new microelectronics materials industry continued to increase; Hubei Ruijia 50,000 tons/year photovoltaic adhesive, and Hubei Xingyou 300,000 tons/year battery-grade iron phosphate project (Phase I) successfully put into operation, the company's new energy industry layout is being fully promoted; Hubei Xingrui's 550 tons/year microcapsules, 5000 m3/year aerogel felt, and Hubei Jixing's 800 tons/year phosphating agent production capacity were put into operation one after another, cultivating new profit growth points for the company.
Houping's 2 million tons/year phosphate ore beneficiation and pipeline transportation project, the Yidu Xingfa wet phosphoric acid refining technology transformation project, and the Hubei Xingrui 30,000 tons/year liquid glue (phase I) project are progressing at an accelerated pace. After completion, they will further consolidate the company's industrial base and enhance the company's development momentum.
Significant resource advantages and strong cost control capabilities
The company's phosphate ore resource reserves and production capacity rank among the highest in the industry. According to the company's 2023 annual report, the company holds 70% of the shares in Jinghua, Jingzhou (with proven phosphate reserves of 289 million tons, currently in the prospecting stage), 50% of the shares in Qiaogou Mining (with 188 million tons of proven phosphate reserves, currently in the exploration and conversion stage), and holds 26% of the shares in Yi'an Industrial (with 315 million tons of proven phosphate reserves, has obtained a mining license, and is currently in the mining engineering construction stage) Company phosphate ore design The production capacity is 5.85 million tons/year. The company made full use of the rich hydropower resources and good lighting resources in the Xingshan region to build 32 hydropower plants with a total installed capacity of 178,400 kilowatts; 13 distributed photovoltaic power plants with a total installed capacity of 1,828 kilowatts. Abundant green power resources can provide a low-cost and stable electricity guarantee for chemical production in the Xingshan region, and also secure more favorable space for the company to participate in carbon transactions in the context of “double carbon” in the future.
Profit forecasts and investment ratings
Taking into account the price differences of the company's main products, we made appropriate adjustments to the company's profit forecast. The company's net profit for 2024-2026 is estimated to be 20.23, 24.11, and 2,818 billion yuan, respectively, corresponding to PE 11, 9, and 8 times, respectively. The company has outstanding advantages in phosphate ore resources. The new materials project brings new profit growth points and maintains a “buy” rating.
Risk warning
Risk of macroeconomic fluctuations; production capacity investment falling short of expectations; risk of product price fluctuations; risk of fluctuations in raw material prices; decline in future demand; progress of new projects falling short of expectations.