The company is one of the leading enterprises in the global fertilizer additives and chemical fertilizer industry. The company was founded in 2007 and listed on the Shenzhen Stock Exchange in 2014. The company is mainly engaged in agrochemical additives and fertilizer business, biological agriculture business and digital agriculture business. Specific products include fertilizer products, chemical fertilizer products, agrochemical additives products, soil improvement products, biological pesticide products, biofertilizer products, etc. By the end of 2023, the company had a design production capacity of 0.023 million tons of chemical fertilizer anti-caking agents (powders) and 0.0345 million tons of chemical fertilizer anti-caking agents (paste) and multi-purpose packaging.

Net profit after deducting 2024H1 increased 98.97% year over year. From 2020 to 2024H1, the company achieved operating income of 6.45, 6.83, 0.848, 1.049 and 0.643 billion yuan, up 10.89%, 5.82%, 24.09%, 23.72%, and 36.43%, respectively; realized net profit after deduction of 6617.48, 3498.74, 49.6521, 70.9516, and 67.2047 million yuan, respectively, an increase of 30.44%, a decrease of 47.13%, and an increase of 41.91%. 42.90%, an increase of 98.97%. The company's profit growth was mainly due to an increase in product revenue and gross margin. In the first half of 2024, the company's gross profit margin for chemical fertilizer additives was 32%, up 6.53 pcts year on year; domestic sales gross profit margin was 30.12%, up 12.73 pcts year on year.

The company actively implements an internationalization strategy and cooperates with Morocco's leading phosphate fertilizer company OCP. The company and Morocco's OCP, the world's largest phosphate fertilizer company, established a joint venture with Hong Kong JV. The company's 100% holding subsidiary, Fubon Africa, and Hong Kong JV used the opportunity of cooperation with OCP to carry out in-depth cooperation with Moroccan and African customers around the phosphorus chemical industry chain, additives industry chain, and value-added fertilizer industry chain. In terms of R&D, the joint venture Hong Kong JV Company built Wuhan JV in Wuhan to carry out research and development in the fields of value-added fertilizer and digital agriculture to help export the intellectual property rights of the company's proprietary technology and services. 2024H1, the company's overseas business achieved revenue of 483.7364 million yuan, an increase of 13.60% over the previous year.

The fertilizer additives market space is broad, and the company is actively expanding production capacity. In recent years, the production scale of China's fertilizer additives industry has grown rapidly, and industrial concentration has continued to increase. Leading enterprises have continuously innovated and transformed through overseas mergers and acquisitions, supply chain integration, etc., and the performance of chemical fertilizer additives produced has reached the international advanced level, gradually breaking down the technical barriers and market monopolies of foreign companies. With the booming development of various value-added fertilizers, the fertilizer industry's demand for additives will also evolve from previous functional additives to low-carbon, greener, and more efficient new agrochemical additives. As a leading enterprise in the industry, the company added 0.015 million tons/year of chemical fertilizer anti-caking agent (powder) production capacity and 0.009 million tons/year of common law caramel production capacity.

Profit forecast. We expect the company's net profit to be 0.11, 0.133, and 0.159 billion yuan respectively in 2024-2026, corresponding EPS of 0.38, 0.46, and 0.55 yuan/share, respectively. Referring to the valuation of comparable companies in the same industry, we gave a PE valuation of 23-25 times in 2024, with a corresponding reasonable value range of 8.74-9.50 yuan (corresponding to PE 1.82-1.98 times), giving a “superior to market” rating for the first time.

Risk warning. Market competition intensifies; raw material supply and prices fluctuate.