Incidents:
On April 19, 2024, Stanley released its 2023 annual report and report for the first quarter of 2024: in 2023, the company achieved operating income of 99.91 billion yuan, up 10.54% year on year; realized net profit attributable to shareholders of listed companies of 701 million yuan, an increase of 58.94% year on year; weighted average return on net assets was 12.20%, up 3.74 percentage points year on year. The gross profit margin on sales was 17.48%, up 3.25 percentage points year on year; the net profit margin was 7.23%, up 2.21 percentage points year on year.
Among them, the company achieved revenue of 2,390 billion yuan in 2023Q4, +10.73% year on month, -0.40% month on month; realized net profit of 121 million yuan, +765.58% year on year, -32.99% month on month; ROE was 2.00%, up 1.74 percentage points year on year, down 1.07 percentage points from month to month. Gross sales margin was 16.00%, up 6.34 percentage points year on year, down 3.54 percentage points from month to month; net sales margin was 5.60%, up 4.07 percentage points year on year, down 2.40 percentage points from month to month.
The company achieved revenue of 2,629 billion yuan in 2024Q1, -13.86% year-on-year, +10.00% month-on-month; realized net profit of 238 million yuan, +11.27% year-on-year and +96.85% month-on-month; ROE was 3.82%, a year-on-year decrease of 0.05 percentage points, and an increase of 1.82 percentage points month-on-month. The gross profit margin on sales was 17.40%, up 1.69 percentage points year on year and 1.40 percentage points month on month; net sales margin was 8.46%, up 1.31 percentage points year on year, up 2.86 percentage points month on month.
Investment highlights:
The amount of compound fertilizer increased sharply, and the 2023 performance increased significantly year-on-year
In 2023, the company achieved net profit attributable to shareholders of listed companies of 701 million yuan, an increase of 58.94% over the previous year. The company's compound fertilizer business increased both in volume and profit, and the performance achieved rapid growth. In 2023, the company sold a total of 3.1314 million tons of fertilizer, up 16.93% year on year, including sales of 2.969 million tons of compound fertilizer, up 18.26% year on year, export sales of 161,500 tons of monoammonium phosphate, down 3.12% year on year, and achieved online retail sales of 82.354 million yuan, up 25.4% year on year. The total number of units sold throughout the year was 3.24 million, up 29.6% year on year. In 2023, the company achieved revenue of 2,041 billion yuan, up 34.07% year on year, gross profit margin of 17.39%, up 3.08 percentage points; chlorine compound fertilizer achieved revenue of 5.875 billion yuan, up 6.95% year on year, gross profit margin 17.28%, up 3.27 percentage points year on year; new fertilizer and others achieved revenue of 1,892 billion yuan, up 1.15% year on year and gross profit margin of 18.49% year on year, up 3.80 percentage points year on year. In terms of expenses for the period, the company's sales expenses rate in 2023 was 4.06%, +0.33pct year on year, mainly due to the increase in sales remuneration due to the year-on-year increase in sales volume and profit; the management expenses ratio was 3.65%, +0.39pct year on year, mainly due to the additional expenses of the Songzi project; the R&D cost rates were 3.50%, -0.02pct year on year; and the financial expenses ratio was -0.98% and -0.23pct year on year, respectively. In 2023, the net cash flow from the company's operating activities was 1,185 billion yuan, or -37.73% year-on-year, mainly due to a decrease in product payments received in advance compared to the same period and an increase in cash purchased for goods and services compared to the same period.
Monoammonium phosphate price difference improved, 2023Q4 profit increased sharply year on year
With 2023Q4, the company achieved net profit of 121 million yuan, +107 million yuan year on year and 60 million yuan month on month; realized gross profit of 383 million yuan, year on year +175 million yuan, and -85 million yuan month on month. The price of compound fertilizer showed an upward trend in the fourth quarter. Downstream dealers were more motivated to pick up the goods. At the same time, the price of ammonium phosphate rose, while the prices of raw materials such as sulfur and synthetic ammonia all declined year on year. The price difference improved significantly, and the company's gross profit increased year on year. According to Wind data, the average price of 2023Q4 chlorine-based compound fertilizer was 2,669 yuan/ton, -12.44%, +10.98% month-on-month, the price difference was 324 yuan/ton, -29.78% YoY, +16.97% month-on-month; the average price of sulfur-based compound fertilizer was 2,979 yuan/ton, -9.03% YoY, +8.87% month-on-month, and the price difference was 285 yuan/ton, +10.62% month-on-month; the average price of monoammonium phosphate was 3305 yuan/ton, +3.68%, +18.68% month-on-month, price difference It was 830 yuan/ton, +101.01% year over year, and +46.08% month on month. In terms of period expenses, the company's sales expenses for 2023Q4 were 119 million yuan, +048 million yuan, and +019 million yuan; management expenses were 111 million yuan, +021 million yuan year on month, +0.19 billion yuan month on month; R&D expenses were 83 million yuan, year on year -0.18 billion yuan, month on month 0.18 billion yuan; financial expenses were -0.2 billion yuan, year-on-year, and -25 million yuan month-on-month.
2024Q1's performance continues to grow. We are optimistic that compound fertilizer will recover in 2024Q1. The company achieved net profit of 238 million yuan, +024 million yuan year on year, +117 million yuan month on month; realized gross profit of 458 million yuan, year on year - 21 million yuan, and +75 million yuan month on month. The first quarter entered the peak fertilizer season, and sales of compound fertilizer increased month-on-month. At the same time, as the price of single fertilizer fell, the price difference also increased month-on-month. According to Wind data, the average price of 2024Q1 chlorine-based compound fertilizer was 2,620 yuan/ton, -13.44% month-on-month, -1.81% month-on-month, the price difference was 420 yuan/ton, -2.46% yoy, +29.49% month-on-month; the average price of sulfur-based compound fertilizer was 2,921 yuan/ton, -10.74% month-on-month, the price difference was 442 yuan/ton, +14.10%, month-on-month; the average price of monoammonium phosphate was 3078 yuan/ton, -6.03%, -6.85% month-on-month The spread is 686 Yuan/ton, +24.24% year over year, -17.38% month over month. In terms of period expenses, the company's sales expenses for the year 2024Q1 were 97 million yuan, +0.05 billion yuan year on month; management expenses were 103 million yuan, +0.18 billion yuan year on month, -08 billion yuan month on month; R&D expenses were 91 million yuan, year on year -14 million yuan, +08 billion yuan month on month; and financial expenses were -0.13 billion yuan, year on year, +0.19 billion yuan month on month. 2024Q1's other income was 0.3 million yuan, +025 million yuan year on year, mainly due to an increase in government subsidies; net investment income was 51 million yuan, +023 million yuan year on year, mainly due to an increase in investment income in joint ventures.
According to Wind data, the average price of 2024Q2 (as of April 23, 2024) chlorine-based compound fertilizer was 2,480 yuan/ton, -7.38% YoY, -5.35% month-on-month, price difference was 433 yuan/ton, -9.13% YoY, +3.15% month-on-month; the average price of sulfur-based compound fertilizer was 2,799 yuan/ton, -3.37% YoY, -4.18% month-on-month, the price difference was 470 yuan/5.85% YoY, +6.21% month-on-month; the average price of monoammonium phosphate was 2,906 yuan/7.ton 62%, month-on-month 5.59%, price difference 458 yuan/ton, +36.25% year over year, -33.17% month on month. As the price of single fertilizer declined, the price spread of compound fertilizer was further repaired month-on-month. At present, the prices of single fertilizer have all fallen to the normal range in history, which is beneficial for compound fertilizer companies to carry out normal marketing and sales, and they are optimistic about the company's quantitative profit recovery.
The phosphorus chemical project is about to be put into operation. The supply capacity of phosphate fertilizer raw materials is expected to increase in 2023, and the construction of the company's “North-South Phosphorus Chemical” project is progressing smoothly. After a year of construction, the Lihe Fertilizer Industry's new construction and expansion project was basically completed by the end of 2023. After the Lihe fertilizer project is fully put into operation, it will have an annual production capacity of 600,000 tons of ammonium phosphate, 300,000 tons of spray-coated sulfur-based compound fertilizer, and 60,000 tons of water-soluble fertilizer. The project will cover most of the markets in Northeast China and Central Plains. It can not only meet the company's supply of phosphate fertilizer raw materials in the northern region, but also fill the gap in the company's spray-coated sulfur-based compound fertilizer products in the northern market. After a year of construction, the new Songzi project was nearing completion by the end of 2023, and the equipment installation work was being carried out in an orderly manner. The construction of the first batch of plants, such as compound fertilizer, has been basically completed, and the conditions for testing are in place. Construction of mineral processing, sulfuric acid, and phosphoric acid sections is also being stepped up to complete trial production as soon as possible. The company initially anticipates that the new Songzi project will be fully put into operation in 2024. The Songzi project will have an annual production capacity of 400,000 tons of ammonium phosphate, 400,000 tons of spray-coated sulfur-based compound fertilizer, 100,000 tons of industrial-grade monoammonium phosphate, 100,000 tons of refined phosphoric acid, and 50,000 tons of iron phosphate per year. The successful commissioning and achievement of benefits from the Lihe Fertilizer Project and the Hubei Songzi Project will effectively reduce the company's production costs, increase product sales, and further enhance the company's operating performance.
Establishing a long-term, stable, and sustainable shareholder value return mechanism On April 19, 2024, the company issued an announcement on the 2023 profit distribution plan, based on the total share capital of 1,156,884,000 shares as of April 18, 2024, and the total number of shares that can participate in the distribution after deducting 3,355,500 shares in the company's special repurchase account, 1,153,528,500 shares to all shareholders registered on the share registration date, with a total cash dividend of 1.30 yuan (tax included) for every 10 shares registered on the share registration date 149,958,705.00 yuan. The current profit distribution cash dividend amount accounted for 24.41% of the net profit realized by the parent company in 2023, and 21.40% of the net profit attributable to shareholders of the parent company realized in the consolidated statement. The company will enhance the company's operating and investor return capabilities through measures such as expanding business scale and improving operational efficiency, coordinate the dynamic balance between performance growth and shareholder returns according to the stage of development, share development results with investors, and establish a long-term, stable and sustainable shareholder value return mechanism.
Profit forecasts and investment ratings
The company's revenue for 2024-2026 is estimated to be 117, 13.2, and 14.3 billion yuan, respectively, and net profit attributable to mother is 816, 9.38, and 1,112 million yuan, respectively, corresponding to PE 8.96, 7.80, and 6.58 times, respectively. Based on the main compound fertilizer business, the company has formed a significant competitive advantage in the fields of brand power, marketing channel construction, new product research and development, agrochemical services, etc. At the same time, the company actively promoted the construction of phosphorus chemical projects to form a complete industrial chain of phosphorus chemicals - phosphate fertilizer - compound fertilizer, covered for the first time, and gave it 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.