Brief performance review

On August 21, the company released its 2024 mid-year report. The company achieved revenue of 1.203 billion yuan, -15.53% year over year; net profit to mother 0.043 billion yuan, -75.06% year over year; net profit after deducting non-return to mother 0.043 billion yuan, or -77.80% YoY. Among them, in the second quarter, the company's revenue was 0.749 billion yuan, +9.78% YoY, +64.98% month-on-month, and net profit to mother 0.053 billion yuan, -33.51% YoY, and +634.44% month-on-month.

Management analysis

Against the backdrop of a declining pesticide cycle, the company's operations are relatively steady. In terms of expenses, in the first half of 2024, the company's sales expenses were 23.32 million yuan, +16.97%; management expenses were 85.56 million yuan, -5.02% compared to the same period; current financial expenses were -2.75 million yuan, or -82.18% compared to the same period, mainly due to small exchange rate fluctuations and a corresponding decrease in net exchange earnings. R&D expenses for the current period were 38.02 million yuan, -0.76% YoY. Judging from the product price, the main herbicide product is currently priced at 0.088 million yuan/ton, the original price of cyafluorofluoroxime is currently 0.108 million yuan/ton, the original price of cyanofloxacin is currently 0.2 million yuan/ton, and the original price of spiroxil is currently 0.14 million yuan/ton; the main pesticide product thiazepam is currently priced at 0.068 million/ton, and the original price of lichthymidine is currently 0.142 million/ton. Prices for most products are in historically lower quantiles.

There are enough projects currently under construction to support the company's future growth. Judging from the information disclosed in the semi-annual report, the company currently has fixed assets of 2.013 billion yuan and projects under construction of 0.314 billion yuan. We believe that the continued commissioning and implementation of the above projects will help the company further expand production capacity and enhance profitability.

Profit Forecasts, Valuations, and Ratings

Prices of the company's main products are currently at the bottom, and profits recovered in the second quarter. We expect the company's net profit for 2024-2026 to be 0.173 billion yuan, 0.267 billion yuan, and 371 million yuan, respectively; EPS is 0.37 yuan, 0.58 yuan, and 0.80 yuan, respectively, and the corresponding PE is 15.26X/9.89X/7.13X, respectively, maintaining the purchase rating.

Risk warning

There is a risk of product prices falling, and there is a risk that raw material prices will fluctuate greatly; the progress of new projects falls short of expectations.