Key points of investment:
Non-net profit after deducting 210 million yuan in '23, an increase of 0.83% over the previous year. In 2023, the company achieved revenue of 10.460 billion yuan, a year-on-year decrease of 10.59%. The main reason is that the domestic agrochemical market is in the inventory removal stage in 2023, and the prices of most raw materials continue to fall. Non-net profit after deducting non-net profit in 2023 was 210 million yuan, up 0.83% year over year. The gross profit margin for the whole year was 7.38%, up 0.82 percentage points year on year, and the net profit margin was 2.37%, up 0.25 percentage points year on year. R&D expenses were 65.36 million yuan, up 42.76% year on year. R&D investment increased a lot. In addition, asset impairment losses amounted to 69.85 million yuan, an increase over the previous year.
Non-net profit of 54 million yuan was deducted for the first quarter of 2024, an increase of 7.5% over the previous year. In the first quarter of 2024, Zhongnong Lihua achieved operating income of 2,397 million yuan, an increase of 2.32% year on year; after deducting non-net profit of 54 million yuan, an increase of 7.5% year on year. The gross profit margin was 6.94%, down 0.01 percentage points year over year. Net profit margin was 2.63%, up 0.1 percentage points year over year.
Sales of pharmaceutical products continued to grow. Pesticide raw drug revenue was 4.392 billion yuan, down 30.17% year on year, and gross profit margin was 5.93%, up 0.39 percentage points year on year. Affected by the continued decline in raw drug prices, sales of pesticide raw drug products declined to a certain extent. Pesticide formulation revenue was 6.016 billion yuan, up 11.49% year on year, gross profit margin was 8.46%, up 0.68 percentage points year on year. Among them, sales of crop nutrition products increased more than 100% year on year, and sales of key product Furia were close to 200 million yuan. The company strengthened agricultural resources in China on the basis of increasing frontline service personnel. ·Service center construction. Looking at the situation by region, overseas business sales declined to a certain extent compared to the previous year, but domestic business increased 4.10% over the same period last year.
Develop international C-side business and enhance global operation capabilities. In 2023, the company's international business shipments increased by about 20%, but due to falling product prices, sales revenue declined year-on-year. In 2024, C-side business pilot work has been carried out in Argentina to export independent brands to the international market, strengthen supply chain capacity building, and continue to promote product registration in foreign markets. The first is to renew the brand image to show the company's strength and new brand concept; the second is to strengthen supply chain capacity building, increase cooperation with leading companies in the industry, establish a Singaporean company, and innovate the business operation model; the third is to strengthen independent product registration, with 50 new registrations in 2023.
Deepen strategic collaboration and strengthen technological innovation. At the end of January 2024, the company officially formed strategic partnerships with Yangnong Chemical and Qingyuan Crop Science. The agreement was to give full play to the channel advantages of the “national team” in the field of pesticide distribution and reach comprehensive strategic cooperation in the fields of original drugs, intermediates, formulations and international market development through resource sharing, patent licensing, and technical collaboration.
Profit forecast. We expect the company's net profit to be 254, 296, and 344 million yuan in 2024-2026, respectively. Referring to the valuation of comparable companies in the same industry, we gave 2024 22-25 times PE, with a corresponding reasonable value range of 20.90-23.75 yuan, maintaining the “superior to the market” rating.
Risk warning. Market competition intensifies; prices of original drugs fluctuate.