The company released the 2024 performance forecast, and the performance was in line with expectations. In 2024, the company expects to achieve net profit of around 5.3 billion yuan, an increase of 17.20% over the previous year. The net profit after deduction is estimated to be around 5.237 billion yuan, an increase of 16.16% over the previous year, and the performance is in line with expectations. Among them, the 24Q4 single quarter is expected to achieve net profit of 0.876 billion yuan, a year-on-year increase of 7.12% and a month-on-month decrease of 44.66%. The performance is in line with expectations. The main reasons for the year-on-year increase in the company's 2024 performance were: 1. Production and sales of major products increased year on year; 2. The procurement costs of major raw materials such as sulfur and coal decreased year on year; 3. The size of interest-bearing debt and financial expenses were further reduced year on year; 4. After completing the minority share repurchase of the subsidiary Phosphor Group, it enjoyed a year-on-year increase in net profit to the mother. The single-quarter results declined month-on-month in 24Q4. We expect this is mainly due to the decline in phosphate fertilizer exports in December and the decline in domestic urea prices.

24Q4 phosphate fertilizer prices are relatively stable, and exports were tightened during the winter storage period in December. According to Baichuan Yingfu data, the average price of monoammonium phosphate in 24Q4 was 3097 yuan/ton (YoY -6%, QoQ -6%), and the average price of diammonium phosphate was 3,617 yuan/ton (YoY -1%, QoQ -1%).

According to data from the General Administration of Customs, the export volume of monoammonium phosphate in October/November was 0.0905/0.2047 million tons, respectively, and the export volume of diammonium phosphate was 0.4607/0.5984 million tons, respectively, +5%/-3% year-on-year. Entering the winter storage period, export inspection was suspended at the end of November, and domestic phosphate fertilizer exports are expected to be relatively limited in December.

Urea prices declined in the fourth quarter, and 25Q1 demand was released or there was a phased recovery. According to Baichuan Yingfu data, the average price of urea in 24Q4 was 1,833 yuan/ton (YoY -24%, QoQ -12%), and the average price of urea in Yunnan was 2259 yuan/ton (YoY -12%, QoQ -4%). Demand in the 24Q4 urea market is sluggish. Although supply has declined, it is still at a high level compared to the same period last year. Combined exports continue to be limited, so prices continue to decline month-on-month. Looking ahead to the future market, 25Q1 spring farming is coming soon, and demand for fertilizer preparation will start one after another; as the weather gradually warms up, downstream board mill starts and expectations rise; after the Spring Festival until the peak season for high-nitrogen compound fertilizer production in March, demand for urea will gradually be released, and there are certain expectations for price restoration.

The minority shares of Phosphate Group were consolidated, and the company added net profit to mother of about 0.1 billion yuan in the quarter. On June 14, 2024, the company announced that it intended to transfer 18.6% of the shares of Phosphate Chemical Group at a consideration of about 1 billion yuan. As of June 30, 2024, payment of the share price has been completed, and the industrial and commercial changes have been completed on August 2. Phosphating Group has become a wholly-owned subsidiary of the company. According to the company's semi-annual report, Phosphate Group achieved net profit of 0.919 billion yuan in the first half of the year. Based on this calculation, the company added net profit to mother of about 0.1 billion yuan in the quarter after this transaction.

Investment analysis opinion: Phosphorus chemical companies with obvious integrated advantages continue to optimize their balance and liability structures, while transforming the layout of fine phosphating business, efficient development of phosphate resources, and comprehensive utilization projects of fluorosilicon resources. Considering the decline in urea prices, phosphate fertilizer exports may decline in December, we lowered the company's net profit forecast for 2024 to 5.321 billion yuan (previous value was 5.532 billion yuan), and maintained the 2025-26 forecast at 5.815 and 6.123 billion yuan, respectively. 2.90, 3.17, and 3.34 yuan. The PE corresponding to the current market capitalization is 8X, 7X, and 7X, respectively. We are still optimistic about the value attributes of phosphate ore resources and maintain the accumulation rating.

Risk warning: 1. Prices of phosphate ore, phosphate fertilizer, yellow phosphorus, polyformaldehyde, etc. continued to fall; 2. The progress of debt reduction was lower than expected, and the balance ratio rose; 3. Expenses increased sharply during the period; 4. The commissioning progress of new material projects was lower than expected.