Incident: The company released its 2023 performance report on April 1, achieving full-year revenue of 11.485 billion yuan, -20.57% year over year; net profit to mother was 773 million yuan, -45.32% year over year.
23Q4 achieved revenue of 2,966 billion yuan, +16.58% year over month, and -14.65% month on month; net profit to mother was 51 million yuan, -52.35% year on year and -82.79% month on month.
The industry's storage cycle+production capacity continues to decline, and falling product prices are dragging down revenue. Major markets around the world are in the inventory removal cycle. Combined with the expansion and release of pesticide production capacity over the past three years, the prices of some raw materials have declined. According to Zhongnong Lihua, as of March 31, 2024, the price index for herbicides was 87.48, -24% year-on-year, and the average value of the price index for herbicides was -45.7% year-on-year for the whole of 2023. The company's herbicides account for more than 80% of its revenue, and the decline in the average price of the company's products dragged down performance. The company's revenue showed marginal improvement year over year. Profits were under pressure during the downturn of the industry, and increased expense ratios during the market expansion period and exchange losses dragged down profits. Affected by the continuous decline in industry sentiment over the past 22 years, the overall profit of the industry is low. In addition, the company expanded its market, improved its global marketing network, and strengthened global operation management, and sales and management expenses increased. At the same time, exchange losses dragged down profits due to exchange rate fluctuations in 23Q4. In 2023, the operating profit margin was 8.1%, -4.2 pcts year on year, and the net profit margin to mother was 6.7%, -3.0 pcts year on year. The profit level of the 23Q4 company declined month-on-month, with an operating profit margin of 1.4%, -7.1 pcts, and -9.3 pcts month-on-month; net interest rate to mother was 1.7%, -2.5 pcts year over year, and -6.8 pcts month-on-month.
“Advanced manufacturing+global marketing” is optimistic about the company's long-term growth. According to the company's announcement, in 2023, the company's dimiya project renovation and expansion project was successfully completed and put into production, focusing on automated and continuous transformation of production equipment; the pyrixazole project with an annual output of 2,000 tons was registered as a construction project in Shandong Province. It is expected to obtain registration documents for important domestic and overseas markets in the second half of 2024, and enter different target markets in the first half of 2025. As a multinational pesticide enterprise born locally, the company focuses on advanced manufacturing, deepens the global marketing network, continuously expands the company's project industry line, and expands the company's market share in order to occupy a more important position in the global pesticide market. The company's net profit for 23/24/25 is estimated to be 773/10.10/1,419 million yuan (previous value: 14.59/18.07 in 24/25), maintaining a “buy” rating.
Risk warning:
The risk of project construction falling short of expectations; the risk of demand falling short of expectations; the risk that the competitive landscape will deteriorate.