The promotion of Daejeon's full program is expected to inject new impetus into the company's growth: as a small-class pesticide other than the three traditional pesticides for herbicides, insecticides, and sterilization, it has the characteristics of small dosage, remarkable effects, low cost, high input-output ratio, and high application threshold. It is an advanced technological means and “new quality productivity” to modernize agriculture. As the company with the largest number of registered plant preparation ingredients and formulation products in China, the company has formed a crop control technology plan and a full crop process solution with plant preparation as the core and a combination of pesticides and fertilizers. In recent years, the company has stepped up efforts to promote full-process crop solutions, implementing integrated management solutions for the crop growth cycle, helping users increase production and revenue while increasing user stickiness. Among them, the company has focused on increasing the promotion of full-process solutions for field crops such as grain and oil in key regions, and factors such as increasing the importance of food security in recent years, the recovery in food prices, and the increase in specialized agricultural operators after accelerated land circulation have also brought favorable conditions for the promotion of field products, which is expected to open up new and broad growth space for the company.
The company's full field plan increased production results: According to the company's official WeChat account “Guoguang Agrochemical”, at the Shandong Full Wheat Test and Acceptance Conference held in Liaocheng, Shandong on June 6 this year, Guoguang's full wheat plan plot increased 254 kg, an increase of 19.4% compared to farmers' self-managed land; at the Jiangsu Test and Acceptance Conference of the Full Wheat Solution held in Rugao, Jiangsu on May 31 this year, the demonstration site increased production by 283 kg compared to field mu, an increase of 29.7%. The results of the company's overall plan to increase production in Daejeon have been verified, which is expected to support subsequent marketing.
The pressure on raw materials and other costs has eased, and profit margins have continued to improve: According to the Zhongnong Lihua Original Drug Price Index, the current comprehensive price index/herbicide price index/pesticide price index is -62.17%/-67.32%/-56.31%/-47.04% compared to the beginning of '22; the price of monomer fertilizer has also adjusted from the extreme high level in '22, and is currently in a moderate and relatively stable range. The company's profit margin as a channel-type enterprise has shown a continuous improvement trend compared to the past few years. The gross margin of the 24Q1 company was 43.8%, with a year-on-year change of +4.5pct, and a month-on-month change of +1.4pct; the net margin was 19.5%, with a year-on-year change of +1.9pct, and a month-on-month change of +3.6pct.
Due to falling raw material prices and changes in the business structure, the average price of the company's products declined in '23. We lowered our average price forecast for future products but improved profit margins; revenue is expected to maintain a high growth rate as plans are expanded throughout the process. We forecast the net profit of the company to be 3.82, 4.77, and 564 million yuan for 24-26 (the original 24-25 forecast was 3.93 million yuan and 445 million yuan). Based on the price-earnings ratio of comparable companies 19 times in 24 years, a target price of 15.58 yuan was given and the purchase rating was maintained.
Risk warning
Risk of price fluctuations of raw materials and products; risk that marketing progress falls short of expectations.