Core views
Demand in the pesticide industry remained low in the first quarter of 2024, and the company's volume and price were under pressure. In the first quarter of 2024, the company's original drug sales volume was 25,000 tons, -10.69% year on year, average price was 691,000 yuan/ton, -32.78% year on year; formulation sales volume was 15,000 tons, -21.30% year on year, average price was 57,500 yuan/ton, +10.16% year over year. In the first quarter of 2024, the company achieved operating income of 3.176 billion yuan, a year-on-year decrease of 29.43%; realized net profit of 429 million yuan, a year-on-year decrease of 43.11%; and realized deducted non-net profit of 427 million yuan, a year-on-year decrease of 40.22%. As inventory removal comes to an end, future demand is expected to gradually pick up, and performance is expected to continue to recover. At the same time, as the company's project construction progresses rapidly, the company has broad room for medium- to long-term growth.
occurrences
The company released its report for the first quarter of 2024
In the first quarter of 2024, the company achieved operating income of 3.176 billion yuan, a year-on-year decrease of 29.43%; realized net profit of 429 million yuan, an increase of 110.10% month-on-month and a decrease of 43.11% year-on-year; realized non-net profit deducted from mother of 427 million yuan, an increase of 110.67% over the previous year and a year-on-year decrease of 40.22%.
Brief review
Sales of 2024Q1 original drugs declined, and performance was under pressure
Demand in the pesticide industry remained low in the first quarter of 2024, and the company's volume and price were under pressure. In the first quarter of 2024, the company's original drug sales volume was 25,000 tons, -10.69% year on year, average price was 691,000 yuan/ton, -32.78% year on year, revenue was 1,724 million yuan, or -39.97% year on year; formulation sales volume was 15,000 tons, -21.30% year on year, average price was 57,500 yuan/ton, +10.16% year on year, revenue was 861 million yuan, -13.30% year on year. In terms of profitability, the company's gross margin in 2024Q1 was 24.34%, -3.15pct year on year, +1.01pct month-on-month, net margin was 13.52%, -3.25pct yoy, and +4.24pct month-on-month. With the end of inventory removal and a gradual recovery in demand, the price of original drugs is expected to rebound, and the company's profitability will continue to recover.
Project construction is progressing rapidly to help the company grow in the future
The Huludao project is expected to become the main driving force for the company's future growth and expand the company's development space. The Yangnong Huludao large-scale fine chemical project has a total investment of about 10 billion yuan, with a total investment of 4.2 billion yuan. The first phase will produce industry-leading products such as insecticides, biocides, herbicides, and plant growth regulators, including varieties such as micronium, dimethoxazole, kung fu methrin, flusazolamide, etc., and can achieve an annual output value of about 15 billion yuan after delivery. At the same time, Liaoning Youchuang achieved the transition from outdoor to indoor operation. The Youjia Phase IV project completed commissioning and successfully achieved production results. The Youjia Phase V project progressed rapidly. The company also completed the installation and commissioning of the formulation plant, as well as the construction of projects such as the headquarters office building and the Plant Protection Research Institute's Process Technology Center. It is expected that it will continue to contribute to the company's performance growth in the future.
Profit forecast and valuation: The company is expected to achieve net profit of 1,484 billion yuan, 1,756 billion yuan, and 2,049 billion yuan in 2024, 2025, and 2026 respectively. The corresponding EPS is 3.65 yuan, 4.32 yuan, and 5.04 yuan, respectively, and the corresponding PE is 17.1X, 14.4X, and 12.3X, respectively.
Risk warning: 1. Geopolitical risk. The company has a large export business and a large share. Under the new international situation, any trade restrictions, fees or other effects caused by geopolitics may adversely affect the company's business, financial situation and business performance; 2. Environmental protection and production safety risks. Most of the raw materials used in the company's production are flammable, explosive, corrosive or toxic substances. The production process involves processes such as high temperature and high pressure. Environmental pollution or production safety accidents will cause risks to the company's production and operation; 4. Production capacity investment falls short of expectations. The Huludao production base is still in the early stages of construction, and due to various external causes, the progress of the new project may fall short of expectations.