Incident: According to the relevant provisions of the “Administrative Licensing Law” and “Pesticide Administration Regulations”, the Pesticide Inspection Institute of the Ministry of Agriculture and Rural Affairs publicized information on 12 new pesticide products reviewed and approved by the 3rd Committee of the 10th National Pesticide Registration and Review Committee. The pyrazoquinoline ester of Xianda Co., Ltd. has passed the registration review. Its dosage forms include the original drug and dispersible oil suspension forms.
Pyrazoloquinoline is a novel type of HPPD inhibitor herbicide with high efficiency, low toxicity, and low residue developed independently in China.
Pyrazole quinoxalate is a benzoylpyrazole herbicide based on the quinazoline dione structure. It not only introduces a pyrazole group based on the parent structure of quinazoline dione, but also successfully introduces N, N-diethyl carbamic acid groups at position 5 of the pyrazole ring, which not only enhances the biological activity of the product, but also increases the crop selectivity of the compound. Pyrazoquinoline is an HPPD inhibitor that interferes with the normal photosynthesis process in plants. Weeds show leaf bleaching, and finally the entire plant withers and dies. It has high efficiency, low toxicity, low residue, strong internal absorption conductivity and quick efficacy. It has good protective effects on older and high-density weeds. Through stem and leaf spray, it effectively controls rice chikanzou, Japanese scabbard, and weeds such as scattering. sexual weeds.
Pyrazoquinoline pioneered the safe application of HPPD inhibitor herbicides to all rice varieties, and the development prospects are broad. Rice is one of the most important food crops in the world. The rice pesticide market accounts for more than 10% of crop pesticides, while 85% of the rice pesticide market is concentrated in the Asia-Pacific region. The Asia-Pacific region, especially China, Japan, and India, is often at the cutting edge of the launch of new rice pesticide products. In rice production, the problem of resistant weeds is becoming more and more prominent. In particular, resistant barnwort and chikinzu are developing rapidly and are becoming more and more difficult to control. In the past 30 years, the number of resistant weed populations in rice has increased dramatically, and more than 80 weed biotypes have developed resistance. Therefore, herbicides have become the main force in the rice pesticide market, accounting for about 40%. Research and development of new safe and efficient rice herbicides is of great significance. Pyrazoquinoline has broken through the worldwide problem that traditional HPPD inhibitor herbicides cannot be used safely in indica rice fields, and pioneered the safe application of HPPD inhibitor herbicides to all rice varieties. This product is safe for hybrid rice, conventional indica rice, japonica rice, and glutinous rice, and is highly safe for humans and animals, and has broad development space.
Pesticide prices continued to decline in 23 years, putting pressure on the company's performance. In '23, the company achieved operating income of 2,482 billion yuan, a year-on-year decrease of 20.58%, and realized net profit to mother of -98 million yuan, a year-on-year decrease of 125.68%. 23Q4 achieved revenue of 418 million yuan, a year-on-year decrease of 36.24% and a month-on-month decrease of 44.96%; realized net profit to mother - 108 million yuan, a year-on-year decrease of 165 million yuan, a year-on-year decrease of 67 million yuan. Pesticide prices continued to decline in 23 years. Increased market competition caused prices for some products to be inverted, and the company's revenue was under pressure. In '23, the company achieved revenue of 22.60, 1.17, and 80 billion yuan for herbicides, biocides and intermediates, respectively, with year-on-year decreases of 18.95%, 47.59%, and 10.67%, respectively.
Sales of the company's major products all increased year-on-year in '23, but the decline in terminal product prices led to a decline in gross margin. In terms of sales, the company achieved sales volume of 1.32 and 0.27 million tons of herbicides and biocides respectively in '23, an increase of 16.93% and 9.24%, respectively, over the previous year. In terms of gross margin, the company's gross sales margin in '23 was 11.54%, down 15.66pcts year on year. Among them, gross margins for herbicides, biocides, and intermediates were 11.79%, 1.80%, and 16.89% respectively, down 15.58, 22.17, and 10.74pct, respectively.
The sales volume of the company's main products increased year-on-year in 24Q1. In 24Q1, the company achieved operating income of 490 million yuan, a year-on-year decrease of 10.56% and a year-on-month increase of 17.17%; realized net profit to mother of -0.14 million yuan, a year-on-year decrease of 58 million yuan, an increase of 95 million yuan over the previous year. In 24Q1, sales of the company's main products increased year-on-year. The enylmorpholine series biocides achieved sales volume of 531.99 tons, an increase of 77.63% year over year. The herbicides showed sales of 1760.84, 616.02, 227.48, and 981.06 tons respectively, with year-on-year changes of +83.22%, +50.74%, -9.25%, and +152.39%. In terms of gross margin, 24Q1's gross sales margin was 12.81%, a year-on-year decrease of 11.42pct.
Improve the production layout of superior products and continuously improve production capacity. By the end of '23, the company had a design production capacity of 1.53 and 0.25 million tons/year for herbicides and biocides, respectively. In 23 years, Liaoning Xianda continued to operate steadily, providing a strong guarantee for the smooth implementation of the company's innovative product projects. While ensuring stable production at the headquarters factory and Weifang Xianda, the company continues to increase investment in new products from Liaoning Xianda to rapidly improve its production capacity and profitability. The third phase of the “project with an annual output of 1,500 tons of original drugs and 3,500 tons of pesticide intermediates” was successfully put into operation and contributed profits. The fifth phase of the “project with an annual output of 1000 tons of imidazole-niacin and 3,000 tons of pesticide intermediates” has entered the trial production stage; at the same time, Liaoning Xianda plans to invest in a “project with an annual output of 1,800 tons of pesticide raw materials and a safety agent with an annual output of 500 tons”. The main products invested in the project include fluoropyrimidine, phenylacetone, and oxazoxazone. The company will also invest in a new “automated comprehensive formulation project with an annual output of 20,000 tons”, which aims to further enhance the company's capabilities in processing dosage products such as emulsions, solubles, suspensions, and dispersible oil suspensions, and provide a solid guarantee for the rapid expansion of the formulation business.
Investment in R&D in the field of innovative pharmaceuticals continues to be increased, and the prototype of the creation matrix is now in shape. By the end of '23, the company had successfully created patented compounds such as quinoxalone, pyrazole quinoxalate, and phenylproxerone. Quinoxalone is the world's first selective ultra-efficient herbicide for sorghum fields. Phenylacetone is a novel ACCase inhibitor with a cyclohexenone structure. It can effectively control graminaceae weeds in rice fields. It has no reciprocal resistance with herbicides commonly used in rice such as cyafloxacalate, oxazolamide, and dichloroquinolinic acid. It can effectively control gramineous weeds that are resistant to ALS inhibitors, AcCase inhibitors (FOPs), hormonal herbicides, etc., and efficiently controls barberry weeds, etc. Quinoxalone has been marketed and sold in the domestic market, and won the 24th Chinese Patent Gold Award in July 23. The product has been registered and deployed in overseas markets and officially registered in Pakistan. In '23, all of the new products created by the company, such as phenylproxerone and pyrazoquinoxalate, have completed small-scale process development and pilot scale-up tests. Currently, registration of pyrazolone has been completed, and registration work related to phenylprofloxone is ongoing, and will soon enter the industrialization stage. The company is cultivating exclusive products such as fluoropyrimidine and 2,4-butyric acid. The pyridoxide development plan has entered the demonstration stage, and the new “quick-drying” scheme enhances the company's competitiveness in the field of herbicides; the wheat field product line relies on fluoropyrimidine to launch the “Five Niutu” program, and registration of new products for resistant and resistant weeds has begun.
Product registration in overseas markets is progressing steadily, and the internationalization process is accelerating. The registration process and commercial cooperation for the company's superior products in overseas markets are progressing steadily. The self-registration layout for raw drugs and formulation products such as enoxalone, imidazole, ethoxacasone, and enylmorpholine has all been completed in the main target markets, and commercial cooperation between approved products and customers is being actively promoted. Independent registration and support customer registration for exclusive products such as 2,4-butyric acid, fluoropyrimidine, and pyrixol have been approved one after another in major markets such as Australia, the European Union, and the United States, and a small number of orders have been signed with overseas customers. In terms of creating compounds, pharmacodynamic evaluation tests of pyrazole quinoxalate and phenoxymethoxone are progressing smoothly in various markets such as Southeast Asia, China, and Latin America, and the efficacy response has been good. It has been decided to launch independent registration in Colombia and the first quarter of the pharmacodynamics trial; quinoxalone has been officially registered in Pakistan and is currently in the process of negotiation and promotion cooperation with local customers.
Profit forecasting, valuation and ratings: Affected by the slump in the pesticide market, the volume and price of pesticide products fell sharply, putting pressure on the company's performance in '23. Since the current price of pesticide raw materials is still low, we lowered our 24-25 profit forecast and added a 26-year profit forecast. The net profit for 24-26 is 0.27 (down 84.7%)/1.46 (37.7%)/256 million yuan, respectively. We are optimistic about the company's production capacity construction situation and the company's overseas patented product registration and implementation process. Development can be expected, and the “buy” rating is maintained.
Risk warning: The price of products and raw materials fluctuates, capacity construction falls short of expectations, and downstream demand falls short of expectations.