Event: the company issued a semi-annual performance forecast for 2021, and 2021H1 achieved a net profit of RMB 2.35-276 million, an increase of 70% RMB100% over the same period last year. 2021Q2 achieved a net profit of RMB1.33-174 million in a single quarter, an increase of 30.39% RMB70.59% over the previous quarter.
Comments:
2021H1 performance forecast is high, slightly higher than expected. The growth of the company's performance is mainly due to the following two reasons:
1) increase gross profit margin simultaneously: in the case of rising raw materials, the company has made many price adjustments according to downstream demand, and made strategic procurement of raw materials with financial advantages to ensure the gross profit margin of products. As of July 5, 2021, according to Zhuang Chuang data, the average daily price of compound fertilizer in China was 3114 yuan / ton, up 51.31% from the same period last year. At the same time, sales of 2021H1 products rose slightly. 2) the monetary funds are abundant, and the investment income has increased significantly: as of 2021Q1, the book monetary funds have reached 1.861 billion yuan. In this case, the company has strengthened its fund management, thus achieving a substantial increase in financial interest income and increasing operating profits.
The prosperity of compound fertilizer is coming, and the pattern continues to be optimized. Affected by the epidemic situation, demand and many other factors, the prices of agricultural products represented by corn continue to rise. According to Wind, as of July 5, China's corn import price reached 386.88 US dollars / ton, up 83.24% from the same period last year. The rise in the price of corn and other agricultural products will help to enhance the enthusiasm of farmers, and the compound fertilizer industry has entered a boom stage of rising volume and prices. In the long run, the pattern of compound fertilizer will continue to be optimized, and high-quality enterprises will fully benefit. Due to the low threshold for chemical fertilizer entry, China's chemical fertilizer industry developed extensively in the early stage, resulting in a serious oversupply of production capacity; however, with the promotion of environmental protection and other policies, low-quality small and medium-sized production capacity was eliminated, and the supply side tended to be concentrated. The market share of large leading enterprises is expected to further increase. In terms of operating rate, according to Zhuangchuang, the operating rate of China's compound fertilizer industry increased from a low of 37 per cent in 2018 to 43.47 per cent in 2020, an increase of 6.47 pct. According to the China Industrial Information Network, the production capacity of the top four enterprises in China's compound fertilizer industry accounted for only 21.6% of the total production capacity in 2019, and there is plenty of room for improvement in the future. As a high-quality compound fertilizer enterprise, the company has competitive advantages in sales channels, capacity layout and cost, and will fully benefit from the centralization of the industry.
Open up the phosphate fertilizer industry chain to ensure that the company fully benefits from the industry cycle dividend. Nitrogen, phosphorus and potassium are the main production costs of compound fertilizer, and the competition among compound fertilizer enterprises finally reflects the competition of cost. Therefore, the extension of upstream resources and the realization of vertical integrated management is the development trend of compound fertilizer industry. At present, the industry is in the upstream channel, and the company intends to acquire high-quality phosphate fertilizer asset Lihe Fertilizer Industry, open up the upstream industrial chain, form a synergy with the company's compound fertilizer business, enhance cost-side competitiveness, and ensure that the company fully benefits from the industry cycle dividend.
Profit forecast: we expect the net profit from 2021 to 2023 to be 416 million yuan, 504 million yuan and 562 million yuan respectively, corresponding to the PE of 14.35, 11.85, 10.62, maintaining the buy rating.
Risk hints: the price boost of agricultural products is not as expected, the rising price of simple fertilizer brings cost pressure, the risk of environmental protection and production safety, and the risk of agricultural policy change.