The company expects first-quarter net profit to grow by no less than 70% year-on-year. Benefiting from the rise in urea prices, the high prosperity of the industry continues, and the heart-to-heart performance will maintain rapid growth in the past 22 years. Finally, we maintain our target price of HK $11.2, corresponding to a 22-year price-to-earnings ratio of 7.5 times forecast earnings, which is 62% higher than the current price.
Summary of the report
In the first quarter of 22, net profit increased by no less than 70% compared with the same period last year. The increase in performance is mainly due to the increase in scale. With the commissioning of Jiujiang base in March 21 and the completion of the renovation project of Xinxiang No. 2 and No. 3 Plant in the fourth quarter of 21, the high-quality production capacity was further released, and the advantages of technology and scale became more prominent, thus enhancing profitability. 2. With the help of the advantages of the park, the group strengthens the flexible adjustment of products, optimizes the product structure, increases the proportion of high efficiency and fertilizer, continuously increases the efforts of R & D and promotion, further enhances the advantages of low cost and product differentiation, improves the market competitiveness and enhances the profit space. 3. The rise in the prices of raw materials and food has pushed up the rigid demand for chemical fertilizers in agriculture, thus boosting the sales and prices of chemical fertilizers and chemicals, benefiting the group's main products, urea, melamine and methanol.
Listed for the first time in 13 years. On April 19, Xinlianxin placed 78.5 million shares (of which 56.5 million were new shares and 22 million were old shares), accounting for about 6.4 per cent of the company's enlarged share capital (4.6 per cent of the new shares). The placing price per share was HK $6.50, a discount of about 12.5 per cent to the 19-day closing price of HK $7.40. A total of 360 million Hong Kong dollars will be raised, and the proceeds will be used for 1. 5 percent. Of this amount, HK $140 million was used to repay bank loans and optimize the debt structure. two。 Another HK $220 million will be used for the construction of projects in Jinchang, Gansu Province and Jiujiang, Jiangxi Province. We believe that Heart to Heart has completed the layout of the three major bases, and the peak of its capital expenditure has passed. Future development will pursue stable growth and reduce debt.
With the resonance of many factors, the price of urea continues to rise. By the end of April, the price of urea was 2880 yuan per ton, an increase of 63% over the same period last year. From January to April 22, urea prices in China continued to rise, rising from 2500 yuan / ton at the beginning of the year to 2880 yuan / ton in April. We believe that there are three core reasons for the rise in urea prices. The price of agricultural products is rising, and the strong agricultural demand plays an absolutely leading role in the price of chemical fertilizer. By the end of April, the price of wheat was 3300 yuan per ton, and the price of corn was 2860 yuan per ton, all of which were the highest in recent decades. two。 The price of coal rises and the cost of urea production increases. 3. After the epidemic, countries around the world attach importance to the issue of food security, and the war between Ukraine and Russia has affected the global price and supply of food and chemical fertilizer.
Maintain the target price of HK $11.2, buy rating. Benefiting from the rise in urea prices, the high prosperity of the industry continues, and the heart-to-heart performance will maintain rapid growth in the past 22 years. Finally, we maintain our target price of HK $11.2, corresponding to a 22-year price-to-earnings ratio of 7.5 times forecast earnings, which is 62% higher than the current price.
Risk hint: industry competition intensifies; epidemic situation intensifies.