Incident: The company released its report for the third quarter of 2024. In the first three quarters of 2024, the company achieved operating income of 22.05 billion yuan, up 0.04% year on year; achieved net profit of 1.314 billion yuan, up 37.85% year on year; 2024Q3 achieved operating income of 8.646 billion yuan, up 3.54% year on year, up 32.69% month on month; achieved net profit of 0.509 billion yuan, up 52.73% year on year and 20.26% month on month.

The agrochemical market is picking up, and the pressure on silicone costs has eased somewhat.

According to the company's operating data disclosure, the average sales price of the company's main products, specialty chemicals, pesticides, fertilizers and silicone products in the first three quarters of 2024 was 10375.23 yuan/ton, 21381.74 yuan/ton, 3116.07 yuan/ton, 10705.07 yuan/ton, respectively, -8.34%, -16.84%, +6.07%, and -9.43%; the production/sales volumes of the above products were 0.4433 million tons/0.3827 million tons, 0.1961, respectively million tons/0.1872 million tons, 1.0492 million tons/0.9624 million tons, 0.1858 million tons/0.1736 million tons. In terms of price, fertilizer prices have risen year-on-year, and winter fertilizer reserves are expected to further boost demand. Although the price of silicone has declined, the price of silicon metal on the cost side has also declined. According to the announcement, the average purchase price of silicon metal in the first three quarters of this year was 11,667.72 yuan/ton, a year-on-year decrease of 16.7%. The improvement on the cost side is expected to reduce the pressure on the silicone sector.

R&D investment remains at a high level, and gross profit margin and net profit margin have increased.

The company's sales, management, finance, and R&D rates for the first three quarters of 2024 were 1.51%, 1.59%, 1.24%, and 3.80%, respectively, +0.32 pct, +0.48pct, +0.19pct, and +0.36pct, respectively.

R&D investment remains at a high level, showing the importance the company attaches to developing high value-added products. The company's gross margin and net margin for the first three quarters of this year were 17.96% and 6.02%, respectively, compared with +4.81 pct and +1.56 pct, respectively. Profitability rebounded markedly.

Xingfu Electronics' IPO was approved, which is expected to consolidate its dominant position.

Earlier, the company issued an announcement, and the IPO of its subsidiary Xingfu Electronics was registered by the China Securities Regulatory Commission. The capital raised this time will invest in the construction of projects such as electronic grade phosphoric acid, ultra-high purity electronic chemicals, and electronic grade ammonia to further consolidate Xingfu Electronics' advantages in this field.

Investment advice:

Considering the recovery in the agrochemical sector, the profitability of the company's phosphate ore, phosphate fertilizer, and glyphosate products increased year-on-year. We raised the company's net profit to mother for 2024-2026 to 1.828/2.347/2.657 billion yuan respectively, and EPS to 1.66/2.13/2.41 yuan, respectively. The corresponding PE was 13/10/9 times, respectively, maintaining the “buy” rating.

Risk warning: Phosphorus chemical products declined, and the commissioning of new projects fell short of expectations.