The performance was lower than expected
The company's 2015 income was 1.532 billion yuan, the net profit attributable to YoY+32.8%, was 131 million yuan, and the earnings per share of YoY-19%, was 0.1671 yuan, which was lower than previously expected.
Of this total, the income in the fourth quarter was 451 million yuan, an increase of 95% over the previous month, and the net profit attributable to it was-6.369 million yuan. The decline in performance was mainly due to lower prices in the sugar industry and the fruit and vegetable processing industry, with gross profit margins of 12.4% and 16.1% respectively lower than the same period last year, 5.49ppt and 9.15ppt, respectively, and the suspension of the policy that potash fertilizer VAT was levied first and then returned from September 1, 15. The resumption of chemical fertilizer VAT resulted in a 20% to 880 million yuan drop in net profit and an investment income of 206 million yuan, down 16% from the same period last year.
Trend of development
Port inventory is high, potash prices are still in the slow bottoming stage. According to Longzhong petrochemical statistics, potash stocks in major ports stood at 2.33 million tons at the end of 2015, up 112% from 1.1 million tons at the beginning of the year and remained high. The average price of potassium chloride in China maintained a short-term shock pattern in 2016. According to grand petrochemical statistics, the average price in March was 2180 yuan / ton, down 5.3% from 2300 yuan / ton in January. The inventory of 2.57 million tons in March is still high.
China invested in Luo potassium to expand production by 300000 tons, which is scheduled to be put into production by the end of the year. The company began planning to build a new production capacity of 300000 tons of potassium sulfate in 14 years, and is expected to start commissioning in August and complete production in December. The completion of the new capacity will lead to an increase in the company's economies of scale and a further reduction in production costs.
Profit forecast
According to the company's 2016 business plan, it is expected to achieve sales revenue of more than 1.7 billion yuan and net profit of 120 million yuan. We slightly reduce the company's 16-year profit forecast by 13% to 0.20 yuan, and give a 17-year profit forecast of 0.24 yuan.
Valuation and suggestion
The neutral rating remains unchanged, and the current share price is 41x and 37x for 2016 and 2016, respectively. Due to the decline in the market valuation center, the target price has been lowered by 21% to 9.5 yuan, compared with 48x for 16 years.
Risk
Fertiliser demand growth is less than expected, valuation hub.