Main points of investment
Event: Cofco Sugar achieved operating income of 4.227 billion yuan in the first quarter of 2021, + 50.70% year-on-year; net profit of 201 million yuan, + 51.39%; deducting non-net profit of 163 million yuan, + 44.93% of the same period last year.
The bottom of domestic sugar prices fluctuated in the first quarter, and the company's sugar sales increased sharply compared with the same period last year. In 2020, the spot sugar in domestic producing areas fell from nearly 5900 yuan / ton at the beginning of the year to about 5200 yuan / ton. The domestic sugar price of 2021Q1 rebounded from the bottom driven by the outer disk, but it was still at a low level as a whole. The spot price of 2021Q1 willow sugar is 5358 yuan / ton,-8% compared with the same period last year, while the international spot price of raw sugar is about 15.6 cents / lb, + 14% compared with the same period last year. In order to make up for the adverse impact of falling sugar prices, the company increased its sales efforts in the first quarter, coupled with a low sales base under the influence of the COVID-19 epidemic in the same period last year, and the company's sugar sales increased sharply compared with the same period last year, driving revenue and profit growth. In addition, with the expansion of revenue scale, the rate of sales, management and financial expenses of the company in the first quarter was 3.26%, 2.64% and 1.23% respectively, which was continuously optimized compared with-0.56pct,-1.34 pct and-0.75 pct,.
Under the adverse weather disturbance, international sugar prices rebounded strongly, and the rise is expected to continue in the future. At the beginning of the first quarter, under the influence of delayed export subsidies in India, poor international logistics and superimposed low production cuts in Thailand, exports from India and Thailand fell sharply compared with the same period last year, global trade flows were phased tight, and international sugar prices once approached 19 cents per pound, reaching a new high since 2018, followed by a deep correction affected by the fall in crude oil prices and the rebound in the Brazilian epidemic.
In April, France suffered a severe frost, Brazil continued to drought, adverse weather disturbance under the international sugar prices rebounded sharply again. Coupled with the expected recovery of fuel ethanol consumption in Brazil in 2021, the global sugar supply in the new crushing season is still uncertain, and international sugar prices are expected to continue to rise.
The price of sugar is strong on the outside and weak on the inside, and the center of domestic sugar price is expected to move up gradually. The output of sugar in China during the 20pm 21 pressing season was 10.5 million tons, + 0.8% compared with the same period last year. While smuggling decreased, imports greatly increased, domestic sugar stocks rebounded at the bottom, and the overall supply and demand was loose. In 2021, against the background of narrowing the internal and external price gap, sugar imports are expected to decrease moderately, and syrup imports may also be subject to more policy restrictions. In addition, the rise in international sugar prices raises import costs, and the linkage between internal and external prices tightens. If raw sugar maintains a rising trend, the domestic sugar price center is expected to move up.
Investment suggestion: the company's sugar imports account for more than half of the country, and the current procurement model gives the company a strong risk resistance. with the improvement of capacity utilization and the rise of sugar prices, the company is expected to maintain steady growth in the future. We expect the company's EPS to be 0.36,0.42,0.43 yuan in 2021-2023, based on the closing price on April 28, 2021, corresponding to a PE of 27.5,23.6,22.5 times, respectively, maintaining a "prudent overweight" rating.
Risk tips: policy changes, natural disasters, sugar price fluctuations, crude oil price fluctuations, exchange rate fluctuations