The company's anti-dumping application was approved by the Ministry of Commerce, which is expected to boost the price of cypermethrin. On May 7, the Ministry of Commerce officially issued the “Notice Concerning the Filing of an Anti-dumping Investigation against Imported Cypermethrin from India”, deciding to open an anti-dumping investigation against imported cypermethrin originating in India from May 7, 2024. The dumping investigation period is the whole of 2023, and the industrial damage investigation period is 2019-2023. The price of cypermethrin has been low for a long time. We believe that along with the anti-dumping investigation, the price of cypermethrin is expected to increase. We expect the company's 24-26 net profit of 13.9/17.8/2.08 billion yuan (corresponding EPS is 3.41/4.39/5.11 yuan), combined with a comparable 24-year Wind average of 22xPE, to give the company a 24-year 22xPE with a target price of 75.02 yuan to maintain the “gain” rating.
Most of China's cypermethrin comes from imports, causing obvious price suppression for similar domestic products. According to the Ministry of Commerce, all of China's imported cypermethrin came from India. The import quantities in 2019-2023 were 2049/3199/3003/2065/3602 tons, respectively. China's demand for cypermethrin was 4160/4980/4310/3060/5040 tons, respectively, accounting for 49%/64%/67%/71%. Most domestic cypermethrin comes from imports, with import prices of 9.0/6.8/ 6.8/7.0/5.2 yuan/ton. The import price reduction compared to domestic sales prices of similar domestic products was 10-35%/10-35%/10-35%/20-45%, respectively. According to Zhongnong Lihua, the average market price of chlorofluorothrin/bifenthrin in April '24 was 5.5/137,000 yuan/ton, yoy -21%/-27%. Prices are all at their lowest since 2019.
Prices of some pesticide varieties increased in 24, and the industry boom is expected to gradually recover in the future. According to Zhongnong Lihua, on May 5, 2024, the company's main products, high-efficiency cypermethrine/glyphosate/ pyrazole/propiconazole/ nitrocketone, the original market prices were 10.7/13.7/17.0/7.7/110,000 yuan/ton, yoy -22%/-6%/-22%/-40%/-12%, respectively. The company's overall products are at the bottom of the boom. We believe that this anti-dumping investigation is expected to drive price restoration of cypermethrin, biphenthrin, and kung fu methrin. In the future, along with factors such as overseas stock restoration, the pesticide industry is expected to gradually recover.
The original drug continues to be laid out, and new projects are progressing in an orderly manner
According to the annual report for the year 23, the company's Liaoning Youchuang project completed the capping of 37 buildings as scheduled before freezing in November 23, to achieve the transition from outdoor to indoor. The first phase of the Huludao Phase I project will be commissioned and put into operation in 2024, and the second phase project is being rapidly followed up. Furthermore, the Youjia Phase 4 Phase 2 Project Company completed commissioning at the end of November 23, quickly achieved production results, and simultaneously accelerated the promotion of the Youjia Phase 5 project. The company has also completed the installation and commissioning of the formulation plant, as well as the construction of projects such as the headquarters office building and the Plant Protection Research Institute's process technology center. It is expected that it will continue to contribute to the company's performance growth in the future.
Risk warning: risk of crude oil price fluctuations; risk of unstable supply of raw materials; risk of demand falling short of expectations.