According to the research report released by Anxin International on the Zhongtong Finance APP, it first rated Migo Group (09879) with a “buy” rating and is bullish on the improvement of the company's profitability driven by the stabilization and rebound of potash fertilizer prices. It is expected that the group's revenue will reach 4.11/4.73/5.48 billion yuan in the fiscal years 2025-2027, with a year-on-year growth of 9%/15%/16%, a net income attributable to the parent company of 0.38 billion/0.44 billion/0.52 billion yuan, with a year-on-year growth of 50%/17%/17%, and a target price of HK$8.

Anxin International's main points are as follows:

MGM Resorts International is the leader in China's potash industry.

The company's main products are potassium chloride and potassium sulfate, which account for 83% and 12%, respectively, of the revenue share in fiscal year 24. Due to the decline in the price of potassium chloride, the company's performance in fiscal year 24 has declined, with revenue reaching 3.77 billion yuan, a year-on-year decrease of 16%, and net profit attributable to the parent company reaching 0.25 billion yuan, a year-on-year decrease of 31%. The bank believes that MGM Resorts International has high-quality customer resources and great potential for growth, and its sales growth rate in the next three years will remain at around 15%. The company has established six production bases in Heilongjiang, Jilin, Guizhou and Guangdong provinces in China, which have superior geographical locations and are located in China's major planting areas, adjacent to major customers, and have convenient transportation networks. The company has established strategic relationships with major customers such as Heilongjiang Agriculture and Guizhou Tobacco, and has maintained business cooperation relationships with other customers such as Hulun Buir Farming and Anhui Huilong for more than 10 years.

China is dependent on imported potash, and MGM has scarce import rights for potash.

The global potash fertilizer market is monopolized by a few large companies, and the pattern is stable in the long term, with obvious supply-demand mismatch. According to data from the USGS, the potash reserves in Canada, Russia, and Belarus account for more than 60% of the world's reserves in 2022. China is the main consumer of potash fertilizers, but its potash resources are relatively scarce, and 50% of its demand for potash fertilizers relies heavily on imports. Migo Group has been operating its potash fertilizer business in China for more than 20 years and has established a comprehensive procurement channel for potassium chloride, which can obtain stable potassium chloride supply from major overseas potash fertilizer producers at competitive prices.

It is expected that China's potash industry will maintain a low-speed growth in the future.

In 2022, the sales volume of potassium chloride in China reached 15.38 million tons, accounting for 77.4% of the total sales volume of potash. The sales volumes of potassium sulfate and potassium nitrate reached 3.73 million tons and 0.76 million tons, respectively. According to Frost & Sullivan's forecast, the sales volume of potassium chloride in China will increase from 16.53 million tons in 2023 to 18.05 million tons in 2027, with a composite annual growth rate of 2.2%. By 2027, the sales volumes of potassium sulfate and potassium nitrate will reach 4.46 million tons and 0.91 million tons, respectively, with composite annual growth rates of 3% and 2.5% from 2023 to 2027.