Event: on June 17, the company announced the signing of a "Joint Venture Framework Agreement" with OCP S.A. (Moroccan Phosphate Group) to jointly finance the establishment of a joint venture company with a registered capital of no more than US $10 million (about RMB 69.244 million). Both parties will each hold 50% of the equity and the right to vote. The initial cooperation period of this Agreement is 2 years, which needs to be extended with the agreement of both parties in the future. The two sides plan to agree on the business plan on June 30, negotiate and sign the formal joint venture agreement on December 31, and complete the industrial and commercial registration of the joint venture company and make the initial working capital of the company in place.
The partner is the world's largest exporter of phosphate rock and phosphoric acid and one of the largest fertilizer producers in the world.
As the world's leading producer of phosphoric acid and phosphoric acid derivatives, Morocco OCP has the largest phosphate ore base in the world. Morocco has proven phosphate reserves of 50 billion tons, accounting for 73 per cent of the global reserves, and the total production of phosphates and derivatives accounts for about 30 per cent of the global market. The company's main products include phosphate rock, phosphoric acid, all kinds of chemical fertilizers, animal feed.
In 2018, the company achieved revenue of 559.06 billion dirhams (about 40 billion yuan), an increase of 15.26 percent over the same period last year, and a net profit of 5.425 billion dirhams (4 billion yuan), an increase of 18.79 percent over the same period last year. OCP in Morocco is currently in the stage of digital transformation.
Join hands with preset joint ventures to further deepen cooperation between digital agriculture and chemical fertilizer industry
The company and Moroccan OCP have been working together in the field of digital agriculture and fertilizer auxiliaries since 2017, and so far, Moroccan OCP has purchased a total of 32 intelligent fertilizer dispensers from the company. The purpose of this Agreement is to further establish a global strategic partnership in related areas such as digital agriculture and fertilizer industry through the establishment of a joint venture company. According to the Agreement, the joint venture company will be set up in Wuhan, Hubei Province, and its main business will be research and development around commissioned projects in the fields of traditional fertilizers, value-added fertilizers, intelligent agriculture, circular economy and phosphate industry. The profit model is to collect license prospect intellectual property fees, technical consulting and service fees from the consignor, and to distribute products according to the sales agreement.
Signing the agreement is expected to accelerate the company's international market development and digital agriculture transformation, is to boost performance!
The signing of this "agreement" has two advantages for the company: first, to promote the internationalization and localization ability of the company! The signing of the Agreement further binds the company's interests with Moroccan OCP, which is expected to enable the company to accelerate the promotion of fertilizer additives and digital agriculture in the African market, and have a positive impact on the company's resource integration with Noveikai in the Netherlands and PST in France; second, to accelerate the transformation process of digital agriculture in the company! 1) this Agreement is a continuation of the 2018 Strategic Cooperation Framework Agreement between the two sides, which is conducive to promoting comprehensive cooperation between the two sides in the fields of traditional fertilizers, value-added fertilizers, intelligent agriculture, circular economy and phosphate industry. the company's business model and profitability may benefit from optimization. 2) the proposed joint venture company, as the first R & D center set up by Moroccan OCP in the Asia-Pacific region, may have a synergistic effect with the company's domestic technological advantages to enhance the company's R & D and innovation capabilities to facilitate the transformation of the company's business from fertilizer auxiliaries to digital agriculture.
Profit forecast and investment advice: we expect that from 2019 to 2021, the company will achieve a revenue of 7.2 billion yuan and a net profit of 1.23 billion yuan and a net profit of 1.5 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 hints: the cooperation progress is not as expected, the raw material price fluctuation risk, the intelligent fertilizer business progress is not as expected, the overseas business expansion is not as expected, and the goodwill impairment risk of acquiring subsidiaries is too fast.