Event: the company released its 2019 semi-annual report, with operating income of 337 million yuan during the reporting period, an increase of 16.08% over the same period last year. Net profit belonging to shareholders of listed companies was 49 million yuan, up 5.91% from the same period last year.
Chemical fertilizer auxiliaries: continue to open up the growing overseas chemical fertilizer market and push the performance to a higher level.
Fertilizer auxiliaries are the main source of the company's performance, accounting for 93.30% of the main business revenue by mid-2019. During the reporting period, the company achieved revenue of 314 million yuan in this sector, an increase of 15.10% over the same period last year, and a gross profit margin of 34.52%, a decrease of 2.18pct over the same period. The reason why the company's fertilizer auxiliaries business performance can maintain rapid growth after the introduction of the "Zero growth Action Plan for Chemical Fertilizer use to 2020" is highly related to the company's continued development of overseas fertilizer growth markets. The company's current layout in overseas markets includes: 1) setting up a project team in North Africa to carry out comprehensive cooperation with Moroccan OCP in the fields of traditional fertilizers, value-added fertilizers, smart agriculture, circular economy and phosphate industry; 2) radiating the markets of North Africa and the Middle East with the European market as the center, by integrating the production capacity and sales channel resources of French PST and Novik of the Netherlands, and further advancing into the Russian market. 3) deeply ploughing the Southeast Asian market, through the research and development and sale of targeted products, to establish a mutually beneficial and win-win relationship with the major local fertilizer manufacturers, at the same time, the company plans to continue to develop into the South Asian market.
Digital Agriculture: with the rapid increase in revenue, innovative ideas open the application field of "cool techs" around the soil.
The company began its efforts in digital agriculture in 2016, and has since continued to search for relevant "cool techs" around the world, and has been trying to apply these technologies to improve agricultural efficiency. At present, the company has formed the layout of digital agriculture with soil as the entrance. According to the company announcement, the revenue of the digital agriculture sector has begun to show in the first half of 2019. From the perspective of the company's main business structure, we believe that the three segment performance except chemical fertilizer auxiliaries are related to digital agriculture. Among them, 1) the revenue of chemical fertilizer products and 2) adding equipment is mainly contributed by the intelligent fertilizer dispensing business, which is 17 million yuan and 491800 yuan respectively, an increase of 0.80% and 10362.59% respectively over the same period last year. 3) other businesses achieved a total revenue of 4.8443 million yuan, an increase of 30184.47% over the same period last year. Combined with the company's interim performance forecast, we believe that the revenue mainly comes from the promotion of Saturas stem water potential sensor technology in the domestic economic zone, as well as the services of the holding subsidiary Canada SoilOptix Rapid soil testing Service in Canada, the United States and other countries. At the same time, we note that the company is involved in the field of soil remediation and management. at present, the company already has a construction project of "soil improver" and is also recruiting high-end talents and looking for investment opportunities. actively develop business opportunities related to soil remediation.
Various and flexible incentive means, research, production and sales to enhance the enthusiasm of Xu Li's long-term development
At present, the company's incentive measures mainly include: 1) the company introduced the super-profit sharing mechanism in 2018, and has achieved successful experience in promoting the enthusiasm of sales staff. In 2019, the company further introduced the mechanism into the production and R & D team; 2) the company issued an equity incentive plan during the reporting period, which plans to grant 7 million stock options and restricted stocks to the incentive target. We believe that these two measures will effectively improve the efficiency of the company's personnel and mechanisms, and be conducive to the long-term development of the company.
Profit forecast and investment advice. We estimate that from 2019 to 2021, the company will achieve revenue of 7.2 million yuan and net profit of 1.23 billion yuan and net profit of 1.01.5 billion yuan. We are optimistic about the expansion of the company's overseas business and the acceleration of the commercialization of digital agriculture to maintain the "buy" rating. Risk tips: cooperation progress is not as expected, raw material price fluctuation risk, intelligent fertilizer business progress is not as expected, overseas business expansion is not expected, the acquisition of subsidiary goodwill impairment risk.
