Incident 1: The company released its 2023 annual report. In 2023, the company achieved revenue of 7.708 billion yuan, a year-on-year decrease of 23.10%; realized net profit of 414 million yuan, a year-on-year decrease of 61.10%; realized net profit of 403 million yuan after deduction, a year-on-year decrease of 61.13%. With 2023Q4, the company achieved revenue of 2,259 billion yuan in a single quarter, a year-on-year decrease of 7.87% and a month-on-month increase of 25.96%; realized net profit to mother of 89.32 million yuan, turning a loss into a profit year-on-year, and a decrease of 4.18% over the previous year.
Incident 2: The company released its report for the first quarter of 2024. With 2024Q1, the company achieved revenue of 1,672 billion yuan, a year-on-year decrease of 16.22% and a month-on-month decrease of 26.00%; realized net profit of 104 million yuan, a year-on-year decrease of 31.09% and an increase of 15.89% month-on-month; realized net profit of 99.57 million yuan after deduction, a year-on-year decrease of 39.42% and a decrease of 3.47% month-on-month.
Comment:
Prices of fertilizer and phosphorus chemical products fell, and the company's performance was temporarily under pressure. In 2023, due to falling prices of main products such as compound fertilizer, fertility/industrial grade ammonium phosphate, and feed-grade calcium hydrogen phosphate, the prices of raw materials such as superimposed phosphate ore were at a high level, and the company's revenue and product gross margin declined somewhat, putting pressure on overall performance. In 2023, the company's business revenue for fertilizer products, industrial grade monoammonium phosphate, and feed-grade calcium hydrogen phosphate was 3,849 million yuan, 1,795 million yuan, and 881 million yuan, respectively; gross margin decreased by 7.8 pct, 17.4 pct, and 0.6 pct year on year, respectively; average sales price decreased by 3.0%, 20.9%, and 19.9% year on year; sales volume changed -7.7%, +10.7% and -22.2%, respectively. Due to falling prices of main products, the company's overall gross margin fell 7.7 pct to 13.1% year on year in '23. The main products of the 24Q1 company are still relatively low. The gross margin of the 24Q1 company was about 13.7%, down 2.6 pcts from the previous year. In terms of expenses, in '23, the company's sales/management/R&D expenses decreased by 25.0%, 22.5%, and 19.7%, respectively. Financial expenses increased 222% year over year, and the cost ratio increased by 0.9 pct to 7.9% year on year during the period. It is also worth noting that with the resource advantages of the joint venture Heavy Steel Mining Taihe Iron Ore, the company achieved high investment returns in '23 and 24Q1. The company's investment income in '23 was 167 million yuan, up 775% year on year; 24Q1 company's investment income was 53.85 million yuan, up 33.8% year on year.
Continue to promote the distribution of mineral resources and open up a second growth curve. The company currently has rich phosphate resources in the three major mines of Mabian, Baokang and Mianzhu, with total reserves of about 130 million tons. In 2023, the company's wholly-owned subsidiary Longmao Phosphate Chemical obtained a mining license of 600,000 tons/year. After the company's Tianrui Mining and Baizhu Phosphate Mine reach production, and Mianzhu Panshengzi phosphate mine resume production and reach production, the company will have an annual production capacity of 4.1 million tons of phosphate ore. The company's budget production of phosphate ore in 2024 is about 2.1 million tons, an increase of about 10.5% compared to 2023 phosphate ore production. In addition, the company relies on participating companies Ganmei Xinhang, Western Lithium, and Heavy Steel Mining to actively lay out Sichuan lithium ore resources and vanadium-titanium magnetite resources to provide factor support for the construction of a “sulfur-phosphorus-titanium-iron-lithium-calcium” multi-resource green circular economy industry chain. Relying on this multi-resource green circular economy industrial chain, the company actively lays out the field of new energy materials and promotes the construction of key projects such as Germana and Panzhihua iron phosphate and lithium iron phosphate projects. Up to now, the infrastructure construction of a 20,000 ton lithium iron phosphate plant in Germany and Argentina has been completed and trial production is in progress. By the end of 2024, the company's German and Arab base will add 40,000 tons/year lithium iron phosphate, and 500,000 tons/year sulfuric acid production plants, and the Panzhihua base will add 50,000 tons/year iron phosphate and 300,000 tons/year sulfuric acid production plants, thus cultivating new growth points for the company's sustainable development.
Profit forecast, valuation and ratings: The company's performance is under pressure due to falling prices of main products such as fertilizer, industrial grade ammonium phosphate, and feed grade calcium hydrogen phosphate. Considering that the current prices of related products are still low, we lowered the company's 24-25 profit forecast and added a 26-year profit forecast. The company's net profit for 24-26 is expected to be 6.53 (down 5.8%)/8.02 (down 3.7%)/985 million yuan, respectively. The company continues to promote the distribution of mineral resources and build a “sulfur-phosphorus-titanium-iron-lithium-calcium” multi-resource green circular economy industrial chain, which will lay a solid foundation for the company's subsequent development and maintain the company's “buy” rating.
Risk warning: Product and raw material prices fluctuate, capacity construction risks, downstream demand falls short of expectations.