Key points of investment:
A leading manufacturer of pesticide formulations overseas. The company is a multinational crop protection company rooted in mainland China and is engaged in pesticide formulation business in more than 90 countries and regions around the world. The company's export value of crop protection products has continued to rank first in the country for many years. The export countries mainly include Brazil, Argentina, Australia, etc. The company has various overseas sales models, and can build its own teams in different countries and regions around the world to sell its own brand or other brand products according to local conditions.
The cost of pesticide creation is increasing year by year, the difficulty of obtaining overseas registration certificates is increasing, and the company has a first-mover advantage. In recent years, the cost and time investment required to create pesticides has been large and is increasing year by year. Multinational giants have basically formed a monopoly on the development of new varieties, and countries already have their own pesticide registration management systems, which poses a high barrier to global pesticide creation and sales. Therefore, by producing pesticides with expired patents, generic pesticide companies that seize the market with low cost advantages have ushered in development opportunities. Judging from the registration policies of various countries, registration costs for individual products continue to rise, registration data is becoming highly standardized and required data is becoming more complex, and the difficulty for pesticide companies to obtain original drug registration certificates overseas continues to increase. The company already has the world's leading pesticide product registration capacity. As of 2023H1, it has more than 300 domestic registrations in China and more than 5,400 overseas registrations, with a remarkable first-mover advantage.
The “rapid market entry platform” is gradually being improved, and overseas business is expected to usher in rapid growth. The company has a global sales network. It has subsidiaries or representative offices in many countries in Latin America, Asia Pacific, Africa and Europe, and has invested in the construction of a “rapid market entry platform”. It plans to complete the construction of a “rapid market entry platform” for major global markets from 2025 to 2029. Currently, the company uses a sales model that combines the traditional export model for pesticide products with the overseas independent registration model for pesticide products. The two models can achieve effective collaboration. In addition, the company focuses on talent building and continues to increase investment in R&D. It will use the advantages of “light structure and quick response” to build its own teams in each target country to combine its own brand TOC and TOB businesses, and the company's overseas business is expected to usher in rapid growth.
Profit forecast and investment advice: The company's 24-26 revenue is estimated to be 118.50, 128.30, and 14.590 billion yuan, respectively, and net profit to mother is 8.41, 11.36 billion yuan, and 1,352 billion yuan, respectively. The corresponding EPS is 3.02, 4.08 and 4.85 yuan, respectively. The PE corresponding to the current stock price is 16.0, 11.9, and 10.0 times, respectively. Relying on the moat of overseas registration certificates, the company combines traditional exports with overseas independent registration, and combines overseas TOC and TOB businesses. Long-term growth is highly certain, and coverage is given a “buy” rating for the first time.
Risk warning: risk that the pesticide industry is not as good as expected, risk of policy changes in pesticide importing countries, risk of exchange rate fluctuations, risk of production capacity construction falling short of expectations, production safety risks