Description of the event

The company released its 2021 annual report. During the reporting period, the company achieved operating income of 4.501 billion yuan, an increase of 8.94% over the previous year, and realized net profit of 305 million yuan, an increase of 82.93% over the previous year. Looking at the fourth quarter alone, we achieved revenue of 1,199 million yuan, an increase of 47.94% over the previous year; realized net profit of 25.2577 million yuan, an increase of 78.78% over the previous year. The company expects to distribute a cash dividend of 2.00 yuan (tax included) to all shareholders for every 10 shares based on the total share capital of 983,781,427 shares (excluding shares that have been repurchased) at the time of implementation of the 2021 annual equity distribution plan in the future. The company released its quarterly report for 2022. During the reporting period, it achieved operating income of 1,274 million yuan, an increase of 4.54% over the previous year, and achieved net profit of 166 million yuan, an increase of 12.16% over the previous year.

Analysis and judgment:

The company's performance was in line with expectations, and net profit growth in the planting industry was impressive

In 2021, the company achieved operating income of 4.501 billion yuan, an increase of 8.94% over the previous year, and achieved net profit of 305 million yuan, an increase of 82.93% over the previous year. Specifically: In terms of pesticide formulations, in 2021, the company's pesticide formulation business consolidated revenue was 2,671 billion yuan, up 18.18% year on year; in terms of the single specialty crop industry chain, in 2021, it achieved reported revenue of 103 million yuan, an increase of 69.97% over the previous year; realized net profit of 08 billion yuan, an increase of 214.23% over the previous year. Since 2017, the company has focused on the specialty crop industry chain business model. Currently, it focuses on Yunnan blueberries, Hainan bird's nest fruit and dragon fruit, and the 2021 single specialty crop industry chain Net profit increased by more than 200%, and the performance was impressive.

Pesticide formulations are growing steadily, and the company is in the leading position in the industry

In 2021, the company achieved consolidated revenue of 2,672 billion yuan in the pesticide formulation business, an increase of 18.18% over the previous year. In 2021, the main raw materials of the company's pesticide formulation products were primary drugs, including glyphosate, kung fu powder, biphenylhydrazide, glyphosate, and tebuzolol. In 2021, the prices of these raw materials rose sharply. The company signed a strategic reserve and advanced strategic procurement to effectively control the procurement costs of glyphosate and kung fu powder. At present, the company has an insecticide production capacity of 26,000 tons/year, a production capacity of 1,900 tons/year under construction, a production capacity of 18,000 tons/year of herbicides, 25,000 tons/year of herbicides, 400 tons/year of additives, and a capacity utilization rate of over 65%. The company is a leading enterprise in the pesticide formulation industry. It has been at the top of the top 50 sales list for more than 10 years. The company's national market share in 2021 was about 4.5%, ranking first in the domestic formulation industry. By the end of 2021, the company's core subsidiaries had 1,456 pesticide product registration certificates, ranking first in the domestic industry.

The crop layout structure is gradually becoming clear. The specialty crop industry chain is about to take off. In 2021, the company achieved consolidated revenue of the specialty crop industry chain of 103 million yuan, an increase of 69.97% over the previous year; net profit of 7.713,500 yuan, an increase of 214.23% over the previous year. In terms of the single specialty crop industry chain, the company focuses on Yunnan substrate blueberries, Hainan bird's nest fruit and dragon fruit, using a single crop as a breakthrough point, introducing or breeding excellent varieties, and building comprehensive operation capabilities in the industrial chain. The upper, middle and lower reaches are the “Crop Science and Technology Research Institute”, “Agricultural Science and Technology Industrial Park” and landmark agricultural product brands and high-efficiency distribution channels, respectively. In 2021, Hainan red dragon fruit entered the harvesting period, bird's nest fruit completed the planting layout, Yunnan blueberries completed the garden planting base in May 2021, and produced their first output in the first quarter of 2022. The results were rapid, and the future can be expected.

Investment advice

Our analysis: 1) Benefiting from the recovery in the prosperity of the downstream planting industry chain, the company's demand for pesticide formulations will continue to improve. As a domestic pesticide formulation leader, the company has obvious advantages in scale and cost, and performance is expected to grow further. 2) The company's single-crop specialty industrial chain has now formed output after previous construction and layout, and future output is expected to grow further. Considering the impact of these factors, we expect the company's operating income in 22-24 to be 51.93/59.69/6.921 billion yuan, respectively, net profit of 3.58/4.41/557 billion yuan, EPS of 0.36/0.45/0.57 billion yuan, and a stock price of 5.82 yuan corresponding to 22/23/24PE on May 6, 2022, 16/13/10X, respectively, covered for the first time, and gave it a “increase in holdings” rating.

Risk Reminder

Fluctuations in drug procurement and supply, uncertainty in the natural environment and risk of fluctuations in agricultural product prices, and risk of talent and management.