Incidents:
The company released its 2023 annual report. In 2023, the company achieved operating income of 7.708 billion yuan, a year-on-year decrease of 23%; net profit to mother of 414 million yuan, a year-on-year decrease of 61%; net profit after deducting 403 million yuan, a year-on-year decrease of 61%; and basic earnings per share of 0.22 yuan/share.
At the same time, the company released its 2024 quarterly report. In 2024, the company achieved operating income of 1,672 billion yuan, down 16% year on year and 26% month on month; net profit to mother was 104 million yuan, down 31% year on year, up 16% month on month.
The bottom of the cycle is under pressure, and I am optimistic that performance will continue to recover
The company's 2023 performance is under pressure, mainly due to factors such as falling product prices and high operation of raw materials such as phosphate ore. The month-on-month increase in Q1 performance in 2024 was mainly due to a 5.62 pct increase in gross margin. We presume this was due to differences in the pace of product sales. According to Baichuan Yingfu data, as of April 26, the price of monoammonium phosphate (55% granules in Sichuan) /industrial ammonium (southwest wet method) /calcium hydrogen phosphate (17% feed powder) was -6%/+9% month-on-month in Q2. With the start of phosphate fertilizer exports, the company's Q2 performance is expected to continue to recover.
Phosphate ore self-sufficiency continues to improve, and the new energy materials incremental project is steadily advancing the company's revenue target of 8.252 billion yuan in 2024. It is planned to produce 2.1 million tons of phosphate ore (an increase of 200,000 tons over the previous year), and it is expected that by the end of the year, infrastructure construction for 40,000 tons of lithium iron phosphate plants, 100,000 tons of sulfuric acid plants, 50,000 tons of iron phosphate plants in Panzhihua, and 300,000 tons of sulfuric acid plants will be completed.
The ability to integrate mineralization is highlighted, and non-phosphorous resources can be deployed in the long term
Demand for phosphate ore has increased dramatically with the development of new energy and other industries, but supply is relatively limited, and there may be a large gap in phosphate ore resources in China in the future. The company focuses on the distribution of mineral resources. It has reserves of 130 million tons of phosphate resources, and the company is the only industrial and capital operation platform for Sichuan development in the mining and chemical industry, and is expected to obtain more resource support. When its Tianrui Mining and Baizhu Phosphate Ore reach production, the phosphate ore production capacity will increase to 4.1 million tons/year after the Mianzhu Banshengzi phosphate mine resumes production, which can basically meet the needs of the existing phosphorus chemical business.
In addition, the company is involved in the development of associated fluorine resources and relies on participating companies to explore the “sulfur-phosphorus-titanium-iron-lithium-calcium” multi-resource green circular economy industrial layout in Sichuan. The long-term space is worth looking forward to.
Profit Forecasts, Valuations, and Ratings
Considering changes in the sales price of the company's products, we expect the company's revenue for 2024-26 to be 83/96/112 billion yuan, corresponding growth rates of 8%/15%/17%, respectively, and net profit to mother of 5.5/7.3/980 million yuan, corresponding growth rate 32%/33%/34%, 3-year CAGR of 33%; corresponding PE is 23.6/17.7/13.2 times, and EPS 0.29/0.39/0.52 yuan, respectively. Continued attention is recommended.
Risk warning: project progress falls short of expectations; product prices fluctuate greatly; environmental costs increase risk