Jingu Finance News | Haitong Int'l released research reports, stating that China XLX Fert (01866) achieved revenue of 17.42 billion yuan in the first three quarters, a year-on-year decrease of 0.6%, with a net income attributable to the parent company of 1.534 billion yuan, a year-on-year increase of 80.7%. The company's performance growth was mainly driven by cost reduction, leading to a 5% year-on-year increase in gross margin. Meanwhile, with the company's production facilities gradually completing maintenance and stable running of production lines effectively reducing the company's overall energy consumption, the company's overall gross margin increased by 1 percentage point to 19% compared to the end of 2023. In terms of expenses during the period, the company's administrative expenses and financial expenses decreased by 2% and 13% respectively year-on-year. In addition, the company sold 100% equity of Tianxin Coal Industry, generating an investment income of 0.79 billion yuan. As of the third quarter, the company has received sale proceeds of 0.8 billion yuan. Based on this, the company completed the capital increase of its subsidiary non-wholly-owned subsidiary, expanding its stake to 80.18%, resulting in a significant increase in net income attributable to the parent company.

The bank continued to point out that the sales volume of major products grew significantly. 1) Urea, with an average price of 2029 yuan/ton in the first three quarters, decreased by 14% year-on-year, with a sales volume of 2.768 million tons, an increase of 33% year-on-year, and a gross margin of 30%, basically flat year-on-year. 2) Compound fertilizer, with an average price of 2679 yuan/ton in the first three quarters, held steady year-on-year, with a sales volume of 1.734 million tons, remaining flat year-on-year, with an increase in the proportion of high-efficiency fertilizers by 2 percentage points and a gross margin of 17%, a 5 percentage point increase year-on-year. 3) Methanol, with an average selling price of 2198 yuan/ton, increased by 2% year-on-year, with a 17% year-on-year increase in sales volume to 0.86 million tons, and a gross margin increased by 8 percentage points to 8% year-on-year. 4) Melamine, with an average selling price of 5833 yuan/ton, decreased by 8% year-on-year, with a 9% year-on-year increase in sales volume to 0.97 million tons, and a gross margin decreased by 4 percentage points to 30% year-on-year. 5) DMF, with an average selling price of 3810 yuan/ton, decreased by 15% year-on-year, with a 33% year-on-year increase in sales volume to 0.231 million tons, and a gross margin decreased by 4 percentage points to 10% year-on-year.

The bank predicts that the company's EPS for 2024-2026 will be 1.18, 1.28, and 1.42 yuan respectively. Taking into account comparable company valuations and the difference in ah stocks valuations, the company is given a 2024 PE multiple of 4.02, corresponding to a target price of 4.74 yuan. Calculated at an exchange rate of 0.92 Hong Kong dollars to Chinese yuan, the corresponding target price is 5.16 Hong Kong dollars (maintained), maintaining an “outperform the market” rating.