Incident: 1. The company disclosed its 2023 annual report. The company's total revenue was 15.1 billion yuan, down 5.38% year on year, and net profit to mother was 1,257 billion yuan, down 7.85% year on year. Among them, 2023Q4 achieved operating income of 3.215 billion yuan, a year-on-year decrease of 12.57%; net profit to mother was 216 million yuan, an increase of 99.64% year-on-year.
2. The company disclosed its 2024 quarterly report. The company achieved operating income of 3.335 billion yuan in the first quarter of 2024, a year-on-year decrease of 24.52%; net profit to mother was 344 million yuan, a year-on-year decrease of 15.83%.
Raw material prices have fluctuated to an end, and sales volume in 2024 is expected to increase the company's sales volume of phosphorous compound fertilizer by 6.30% in the full year of 2023, including ① phosphate fertilizer sales of 1.0595 million tons (yoy +13.97%); ② sales of conventional compound fertilizer of 2.8857 million tons (yoy -1.49%); ③ sales of new compound fertilizer of 1.122,600 tons (yoy +23.60%). The price of monomer fertilizer fell rapidly in the first half of 2023, disrupting the procurement pace of compound fertilizer dealers. The company's revenue from ordinary fertilizer fell 23% in the first half of the year 23, and the new fertilizer fell 12%. Beginning in mid-2023, as the price of single fertilizer stopped falling and stabilized, the sales volume and price of compound fertilizer rose sharply. The company's revenue for the second half of 2023 increased 11% year on year, and net profit to mother increased 33% year on year. 2024Q1, due to fluctuations in raw material prices and the temperature in mid-early March in Northeast China was 10℃ lower than the same period last year, downstream channel preparation was delayed compared to the same period last year, and the company's revenue declined. We judge that the overall price of single fertilizer will be stable in 2024. The normal stocking market environment for compound fertilizer dealers is good, and we are optimistic that the company's compound fertilizer sales will increase in 2024.
Compound fertilizer capital expenditure has entered the flowering and fruiting period, and the share of new fertilizer structures is expected to increase!
The company has developed a production capacity of about 9.83 million tons of high-concentration phosphorus compound fertilizer per year, and the scale of the enterprise ranks among the largest phosphorus compound fertilizer enterprises in the country. In September 2022, the company's technical improvement project with an annual output of 300,000 tons of ammonia was officially put into operation, enabling the three phosphate fertilizer production bases in Hubei to supply their own synthetic ammonia. At the end of 2023, the company's annual output of 150,000 tons of water-soluble fertilizer and 300,000 tons of slag acid fertilizer project began trial production. The company's capital expenditure on compound fertilizer has entered the fruiting period, which is expected to further reduce the company's compound fertilizer production costs and increase gross profit margin. The company continues to optimize its product structure. In 2023, when revenue from conventional compound fertilizer declined, the company's revenue from the new compound fertilizer increased by 12.5% and gross margin reached 19.47% (up 1.1 pct year on year). In the future, an increase in the proportion of the company's new fertilizer structure is expected to further enhance the company's profitability.
Phosphate ore is expected to continue to be injected, and the company's future profitability is expected to further enhance the company's future profitability. In 2021, the output will exceed 800,000 tons. The two projects that are expected to contribute to the supply of phosphate ore in the future are Baokang Zhuyuangou phosphate ore injected into a listed company in 2022. The output is expected to reach 120/150/1.8 million tons in the first, second, and third years of operation. Furthermore, Yangfeng Group, the controlling shareholder, promised earlier to inject the shares of Jingmen Fangmashan Phosphorus Mining Co., Ltd. (also known as Lianhuashan Mine) into the company. The combined production capacity of the two mines reached 3.3 million tons. Therefore, we judge that the company's ability to be self-sufficient in phosphate ore is expected to increase significantly in the future, further enhancing the company's profitability.
Profit forecast: Considering the lower prices of the company's main products and the low price of iron phosphate, we lowered our profit forecast. We expect the company's net profit to be RMB 1,431, 16.61, and 19.95 billion yuan respectively in 2024-2026 (the original value for 24-25 was RMB 16.76 billion and RMB 1,966 million). The company has obvious advantages in phosphorus compound fertilizer. Sales of compound fertilizer are expected to increase in 2024, maintaining a “buy” rating.
Risk warning: price fluctuations of agricultural products and raw materials; policy risks; production safety risks