Guangxin Co., Ltd. announced its three-quarter report on October 28: Q3 revenue of 1.2 billion yuan, -9%/+12% month-on-month, and net profit of 0.16 billion yuan to mother, -46%/-13% month on month. In the first three quarters, the company achieved revenue of 3.5 billion yuan, or -31% YoY; net profit attributable to mother was 0.57 billion yuan (not 0.54 billion yuan), or -57% YoY (minus -56% YoY). The company's third-quarter results were higher than our forward-looking expectations (0.13 billion yuan), mainly due to good sales of pesticide raw materials. Considering that the price of pesticide products is at the bottom of the consolidation period, the economy is expected to improve in the future, and the rating was lowered to “increase”.

The company's pesticide prices declined due to insufficient demand, etc., and the comprehensive gross margin was -6.6pct to 31.0% year-on-year. Pesticide prices have declined since this year due to insufficient market demand and a surge in shipping costs. According to CNG Lihua, the average market prices for dixolone/glyphosate/indacarbox/methylthione/polymyxin in the first three quarters of 24 were 4.2/2.6/0.932/0.038/0.035 million/ton, yoy -5%/-25%/-2%/-7%/-14%, respectively. revenue 0.67 billion yuan, yoy +26%, sales volume 0.023 million tons, yoy +34%, average price 0.029 million/ton, yoy -6%. According to Baichuan Yingfu, the average market price for nitrochlorobenzene/o-nitrochlorobenzene/ 32% liquid alkali in the first three quarters of 24 years was 7646/5550/863 yuan/ton, yoy +3%/+20%/-9%. In the third quarter of '24, the company's main pesticide intermediates revenue was 0.42 billion yuan, yoy -18%, sales volume 0.182 million tonnes, yoy +0%, average price 0.002 million/ton, yoy -18%. Furthermore, prices of raw materials such as pure benzene increased, and the comprehensive gross margin for the first three quarters of 24 was -6.6pct year on year to 31.0%.

Prices of pesticide products are at the bottom of the consolidation period, and the future is still waiting to improve. According to Zhongnong Lihua and Baichuan Yingfu, as of October 27, the company's main products, dixacarbonyl/indacarboxyl/methylthiobenzyl/polymycin, 32% liquid alkali prices were 4.2/2.5/92.0/3.8/3.8/3.5/0.006/0.001 million/ 0.001 million/ 0.001 million/ ton from the end of June 0/0/-2.0/0/-0.1/+0.04/0.0002 At million yuan/ton, the pesticide industry is at the bottom of the consolidation period, and the price of intermediate products is at the bottom. We are waiting for the economy to improve in the future.

Profit forecasting and valuation

Pesticide prices weakened due to downstream demand, etc., so we adjusted the company's net profit for 24-26 to 0.78/1.03/1.35 billion yuan (previous value was 1.25/1.57/1.86 billion yuan), -46%/+32% YoY, and the corresponding EPS was 0.86/1.13/1.49 yuan (previous value was 1.37/1.72/2.04 yuan). Combined with Wind, which is 12 times the average PE expected by the company over 25 years, considering that the company created relatively few pesticide layouts, the company was given an 11-fold PE valuation in 25 years, the target price was given 12.43 yuan, and lowered to an “increase in weight” rating.

Risk warning: Prices of raw materials fluctuate greatly; production of new projects falls short of expectations; downstream demand falls short of expectations.