Event: the company released the 2020 annual report, with annual revenue of 6.183 billion yuan, an increase of 7.05% over the same period last year, and a net profit of 288 million yuan, an increase of 165.62% over the same period last year. The net profit after deducting non-return was 256 million yuan, an increase of 204.45% over the same period last year, and basic earnings per share was 0.25 yuan. The company released its quarterly report for 2021, with revenue of 1.589 billion yuan in the first quarter, a decrease of 14.47% over the same period last year, and a net profit of 102 million yuan, an increase of 62.00% over the same period last year. The net profit after deducting non-return was 88.661 million yuan, an increase of 79.88% over the same period last year.
Comments:
Sales force superimposed cost control to support high performance growth for the whole year. In terms of sales volume, the planting industry boom superimposed the company's sales strength, driving the growth of sales for the whole year. Prices of agricultural products have risen sharply since 2020. Domestic corn purchase prices have risen by 38% for the whole year, soybean prices by 27%, and japonica rice prices by 14%. To a certain extent, the rising price of agricultural products has boosted farmers' expectations of planting income, and farmers' willingness to plant investment has increased significantly, driving the demand for compound fertilizer. In 2020, the company's compound fertilizer sales totaled 2.52 million tons, an increase of 14 percent over the same period last year, of which field crop fertilizer sales were 1.91 million tons, up 14 percent, and cash crop fertilizer sales were 610000 tons, up 16 percent over the same period last year. The company continues to carry out channel reform and product upgrading, focusing on driving the market share of cash crop fertilizer, and successfully opened up the horticultural fertilizer market in 2020 to boost sales. In terms of gross margin, the company optimizes inventory management and improves the level of gross margin. The price of simple fertilizer rebounded month-on-month in the fourth quarter. On the one hand, the company carried out strategic procurement and directly imported 40,000 tons of potash fertilizer in 2020, achieving a breakthrough in import business; on the other hand, the company continued to improve the turnover rate of raw material inventory and effectively controlled the production cost. In 2020, the gross profit margins of sulfur-based and chlorine-based compound fertilizers were 17.52% and 18.63%, respectively, increasing 3.53pct and 3.08pct compared with 2019, while the annual gross profit margin of the new fertilizer was 19.98%, an increase of 1.05pct over the previous year.
The first quarter is the peak spring fertilizer season, and the prices of raw materials fluctuate greatly. According to wind,21Q1, the price of domestic ternary compound fertilizer is + 2.2% year on year; at the cost end, the prices of urea, potassium chloride and monoammonium phosphate are + 5.2%, + 0.5% and + 22.3% respectively compared with the same period last year. The company effectively controls the production cost, and the gross profit margin of the product is much higher than that of the same period, driving the growth of performance.
The production capacity has come to an end, and the cost control has been continuously optimized. Since 2013, the company has invested heavily in the construction of production bases across the country. After 2017, with the gradual improvement of production capacity layout, the scale of projects under construction is decreasing year by year, and the depreciation pressure is relatively light. In 2020, the company made a full impairment of 50.5832 million yuan on Hubei Zhongfu's long-term equity investment to improve asset quality. At the same time, the company continues to strengthen cost control. In 2020, the company's sales expenses are-1.71% year-on-year, and management expenses are-4.9% year-on-year, further reducing manpower and processing costs.
During the upward period of the industry, the company's sales advantages will be brought into full play and will be optimistic about the company's long-term growth. As the back end of the industrial chain, the compound fertilizer industry directly connects agricultural traders and terminal farmers, and the industry leaders have formed an agrochemical commercial network all over the country, which is of great commercial value. The company is a national compound fertilizer leader with brand and marketing advantages. according to the 2020 annual report, the brand value of "Stanley" has reached 3 billion yuan, opening up more than 3000 first-class dealers and more than 100000 terminal outlets. With the rise in grain prices driving up the prosperity of compound fertilizer and the increase in farmers' demand for fertilizer, we believe that the channel-end advantages of the company will be brought into full play and are optimistic about the long-term growth of the company.
Risk hints: the price of compound fertilizer products changes greatly; the price of simple fertilizer fluctuates greatly; the downstream agricultural demand is lower than expected; the report information comes from public data, and there may be a risk of lag in the update of public information.
Profit forecast: taking into account the compound fertilizer boom upward, we adjust the profit forecast, the 2021-2023 net profit is expected to be 416 million yuan, 504 million yuan, 562 million yuan (before the adjustment is expected to return to the mother net profit of 217 million yuan, 415 million yuan, 503 million yuan respectively), corresponding to the PE is 14.24 11.76 pounds 10.54 times, to maintain the buy rating.
