Description of the event
On April 22, the company released its 2024 quarterly report and 2023 annual report. Revenue for the first quarter of 2024 was 1,672 billion yuan, down 16.2% year on year and 26% month on month; net profit to mother was 104 million yuan, down 31.09% year on year, up 15.89% month on month; after deducting non-net profit of 100 million yuan, down 39.42% year on year and 3.47% month on month. Revenue for the full year of 2023 was 7.708 billion yuan, down 23.10% year on year; net profit to mother was 414 million yuan, down 61.10% year on year; after deducting non-net profit of 403 million yuan, down 61.13% year on year.
Gross profit declined due to both cost and sales pressure, and the price of main products is expected to gradually rise in 2023, when the company's main products are under pressure on the cost side and sales side, leading to a decline in gross profit. In 2023, the average selling price of the company's main product industrial grade ammonium phosphate was 5557 yuan/ton, with operating income of 1.79 billion yuan, gross profit margin of 19.42%, down 17.39 pct; the average price of feed grade monoammonium phosphate was 3052 yuan/ton, with operating income of 860 million yuan, gross profit margin of 17.38%, down 0.56 pct year on year. Prices of phosphate ore raw materials continued to be high in 2023. According to Baichuan Yingfu statistics, the average price of 30% grade phosphate ore was 990 yuan/ton, up 10.2% year on year. As fertilizer companies began to replenish stocks in the first quarter and phosphate export quotas were announced, the price of monoammonium phosphate rebounded. According to Baichuan Yingfu statistics, the average price of 55% powdered ammonium phosphate was 3046.57 yuan/ton in March 2024, up 1.11% from the previous month.
The wholly-owned Sun company Mianzhu Chuanfalong was established to enter the field of new energy materials. On October 19, 2023, the company announced that the wholly-owned subsidiary Deyang Chuanfalong Python will establish a wholly-owned subsidiary Mianzhu Chuanfalong Python New Materials Co., Ltd., to invest in the construction of 100,000 tons of lithium iron phosphate per year and supporting production equipment. This is conducive to strengthening industrial synergy between bases and helping the Deyang Chuanfalong lithium battery new energy materials project to reduce overall costs and increase efficiency. With the increase in the penetration rate of new energy vehicles, demand for lithium iron phosphate materials is strong, and the market size will reach 7.45 billion yuan in 2023. As an established phosphorus chemical company, the company's entry into the lithium iron phosphate circuit will help give full play to its resource advantages, broaden the product matrix, and create new profit growth points.
Based on resource advantages, integrated mineralization continues to advance
The company adheres to the integrated mineralization development model and continues to improve the upstream and downstream support of the industrial chain. The company has increased its ability to guarantee upstream resources and has reserves of about 130 million tons of phosphate resources. The company's Tianrui Mining and Baizhu Phosphate Mine have reached production. After the Mianzhu Banshengzi phosphate mine resumes production and production is reached, the company will have an annual phosphate production capacity of 4.1 million tons, and the self-sufficiency rate and overall economic benefits of phosphate ore will increase significantly. Currently, the company has industrial grade monoammonium phosphate production capacity of 300,000 tons/a, feed grade calcium hydrogen phosphate 440,000 tons/a, fertilizer 1.36 million tons/a, lithium iron phosphate production capacity of 60,000 tons/a, and iron phosphate production capacity of 150,000 tons/a.
After the German-Arab lithium iron phosphate and Panzhihua iron phosphate projects are all put into operation, it will further promote the company's “sulfur-phosphorus-titanium-iron-lithium-calcium” multi-resource green circular industrial economic chain, laying the foundation for the company to extend and strengthen the chain and continue to develop steadily.
Investment advice
We expect net profit from 2024-2026 to be 623, 7.28, and 889 million yuan, respectively (before 2024-2025, 6.85 million yuan and 927 million yuan), with year-on-year growth rates of 50.4%, 16.8%, and 20.8%. The current stock price corresponds to PE at 21, 18, and 15 times, respectively. Due to uncertainty about the expansion of production in the phosphate ore industry and considering the supply and demand pattern of downstream products, the rating was lowered to “gain weight”.
Risk warning
(1) Higher prices of raw materials lead to higher costs;
(2) macroeconomic fluctuations;
(3) Production capacity release progress fell short of expectations;
(4) Downstream demand fell short of expectations.