“去库存”影响趋缓，利润环比回升。根据公司投资者关系活动记录表披露，公司认为植保产品“去库存”行情目前处于末期，趋势有所减缓。植保市场有小部分产品开始出现需求恢复的迹象，但整体来看还没有完全走出“去库存”的行情。结合主流制剂厂商的数据，我们认为，当前农药行业渠道库存相比上半年的确有所好转，但从历史分位数看仍处在相对高位，周期反转仍需等待一段时间。公司业务以CDMO 模式为主，专利期内的产品占比较大，公司认为，客户出于稳定供应链的考虑，通常会在“去库存”周期减缓采购量，但与自产自销等模式不同的是，客户通常不会完全停止相关专利期内产品的采购，这会使得专利药的回暖较仿制药存在有所滞后的趋势。3Q24 results are in line with our expectations
The company achieved operating income of 4.359 billion yuan (YoY -13.14%) in 1-3Q24, and net profit attributable to shareholders of listed companies was 32.5038 million yuan (YoY +143.13%), after deducting non-net profit of 18.6739 million yuan (YoY -11.51%). Among them, 3Q24 achieved operating income of 1.381 billion yuan (QoQ -8.7%), net profit attributable to shareholders of listed companies was 18.348 million yuan (QoQ +60%), after deducting non-net profit of 5.933 million yuan (QoQ +347.4%). The performance was in line with our expectations.
Development trends
The impact of “inventory removal” has slowed, and profits have rebounded month-on-month. According to the company's investor relations activity record sheet, the company believes that the “inventory removal” market for plant protection products is currently in its final stages, and the trend has slowed down. A small number of products in the plant protection market are beginning to show signs of recovery in demand, but overall, they have not completely escaped the “inventory removal” market. Based on data from mainstream formulation manufacturers, we believe that the current pesticide industry channel inventory has indeed improved compared to the first half of the year, but judging from historical quantiles, it is still relatively high, and the cycle reversal will still take some time. The company's business is mainly based on the CDMO model, and products during the patent period account for a relatively large share. The company believes that customers usually slow down purchases during the “inventory removal” cycle due to considerations of stabilizing the supply chain, but unlike models such as self-production and self-sale, customers usually do not completely stop purchasing products during the relevant patent period, which will cause the recovery of patented drugs to lag behind generic drugs.
We believe that the company's plant protection products fluctuate less than generic drugs, and the profit side is expected to continue to improve as the UK and Malaysia bases gradually get on the right track.
Cancelling repurchased shares to enhance investor confidence. In order to increase the long-term investment value of the company, increase the level of earnings per share, and further enhance investor confidence, the company plans to change the use of repurchase shares in the 2024 share repurchase plan from “for employee stock ownership plans or share incentives” to “use to cancel and reduce registered capital accordingly”, that is, cancel the total 11,913,139 shares that the company has repurchased in 2024 in the special securities account and reduce the company's registered capital accordingly.
Profit forecasting and valuation
Plant protection product inventory removal is nearing its end, and the company's profit continues to improve. We maintain a net profit of 0.109/0.308 billion yuan in 2024/2025. The current stock price corresponds to 2024/2025 50.3/17.9x P/E. Considering the expected recovery in the sector and an increase in the valuation center, we raised our target price by 25% to 6.7 yuan and maintained a “outperforming industry” rating, corresponding to 56.6/20.1x P/E in 2024/2025, with 12.4% upside compared to the current stock price.
risks
The development of pharmaceutical intermediates fell short of expectations, and the price of pesticide intermediates dropped sharply.
