Adama released its 2024 mid-year report: The company achieved operating income of 14.91 billion yuan, YoY -13.58%, and net profit to mother of 0.895 billion yuan in the first half of 2024.
The pesticide industry is sluggish, and the company's performance is still under pressure. In the first half of 2024, the market for bulk plant protection products was fiercely competitive, and the channel procurement trend was instantaneous, leading to a decline in the company's overall sales. Among them, the company's average sales price fell 10% year on year and sales volume fell 4% year on year. By region, in the first half of 2024, the company's sales in Europe, Africa and the Middle East fell 11.1% year on year to 0.679 billion US dollars, sales in North America fell 5.0% year on year to 0.414 billion US dollars, sales in Latin America fell 28.9% year on year to 0.4 billion US dollars, and sales in the Asia-Pacific region fell 17.0% year on year to 0.605 billion US dollars.
Faced with a challenging market environment, the company launched the “Endeavour Plan”, which aims to break through against the trend by improving business quality. The company plans to focus on the value innovation segment, that is, to achieve product innovation by applying new proprietary formulation technology to existing active ingredients, while optimizing the company's product portfolio and improving production costs and operating expenses. We believe that inventory removal from overseas markets is nearing its end, and the new cycle of stocking is about to begin. At that time, market demand will gradually be released, industry sentiment will bottom up, and pesticide product prices will rebound. At that time, the company's overall revenue and profit levels are expected to improve.
Continue to promote the development strategy of product differentiation to drive the long-term development of the company. A differentiated product portfolio strategy helps continue to drive business growth. The company's differentiated products meet the specific needs of growers through innovative formulation technology and/or novel original drug ingredient blending ideas, including products based on active ingredients with recently expired patents and high commercial potential, as well as products with proprietary formulation technology, products containing more than one mechanism of action, and biopesticides. In order to continue to expand its differentiated product line, the company will continue to register and launch various new products around the world in 2024. We expect that by implementing the above product strategies, the company is expected to consolidate its differentiated competitive advantage, continue to promote business growth, and drive the company's long-term development.
Company profit forecast and investment rating: As a leading global generic pesticide company, the company's differentiated product portfolio boosts business growth and benefits from syngenta Group's internal collaboration. We are optimistic about the company's long-term development prospects. Based on the company's 2024 mid-year report, we adjusted the company's profit forecast for 2024-2026 accordingly, that is, net profit for 2024-2026 was 0.99, 3.73, and 526 million yuan, respectively, corresponding EPS was 0.04, 0.16, and 0.23 yuan, respectively. The P/E values corresponding to the current stock price were 103, 27, and 19 times, respectively. Maintain a “Highly Recommended” rating.
Risk warning: downstream demand falls short of expectations; product prices have dropped sharply; registration of new products falls short of expectations.