2022H1 net profit is expected to grow by more than 100 per cent year-on-year. According to the company's announcement, the unaudited net profit of the group's 2022H1 is expected to increase by more than 100% over the same period last year. According to this, the group's 2022H1 is expected to achieve a net profit of more than 1.182 billion yuan. The growth was mainly due to the improvement in the epidemic, the continuous recovery in demand for the Group's main products since last year, and the increase in both sales and average selling prices of the Group's major products, resulting in an increase in expected net profit.
The valuation of Fufeng Group is lower than the industrial value. According to Xinghu Science and Technology Bulletin, in 2021, Ipin Group has revenue of 14.66 billion yuan and profit of 360 million, while Guangxin Group is valued at 5.08 billion times static PE14. In 2021, Fufeng Group has an income of 21.6 billion yuan and a net profit of 1.28 billion times that of static PE9.75. We believe that Fufeng Group's current valuation is low, the margin of safety is high, and there is much room for improvement in the future.
Under the dual-carbon background, the industry is expected to change from excessive competition to reasonable competition, and the net profit rate of sales has a lot of room to improve. In the past few years, due to the high price of raw material corn and the influence of double control of energy consumption, the backward small and medium-sized production capacity in the industry has been gradually shut down due to the pressure of declining profitability and environmental protection, and the industry has shown a pattern of oligarchic competition. leading enterprises in the industry have gradually become profit-oriented in product pricing. We believe that under the dual-carbon background, the industry is expected to change from excessive competition to reasonable competition, which will lead to the improvement of profitability. In addition, in 21 years, the net profit rate of sales of Longyi to Longsan Plum Blossom Biology, Fufeng Group and Yipin Group is only 10%, 6% and 2.4%. Compared with the leading enterprises in other industries in the chemical industry, the net interest rate is obviously on the low side, and there is still much room for improvement in the future.
Profits of large products such as monosodium glutamate, lysine and threonine are still low, while xanthan gum, a small product, benefits from the boom in crude oil, and prices continue to rise. According to Zhuochuang Information, as of June 24, 2022, monosodium glutamate was quoted at 9660 yuan / ton, up 7.87% from the same period last year, and the price difference of homemade synthetic ammonia monosodium glutamate was 1702 yuan / ton, down 13.69% from the same period last year; lysine was quoted at 11200 yuan / ton, up 24.44% and 2622 yuan / ton, up 127.09% from the same period last year; threonine was quoted at 11350 yuan / ton, up 7.58% from the same period last year, and the price difference was 2722 yuan / ton, down 2.89% from the same period last year. Xanthan gum was quoted at 39,000 yuan / ton, up 67.74% from the same period last year, and the price difference was 284,000 yuan / ton, up 91.95% from the same period last year.
We believe that at present, the price of the company's main products is still low, and there is still room for improvement in the future.
Profit forecast and valuation: we expect the net profit of Fufeng Group from 2022 to 2024 to be 22.12,30.19 and 3.721 billion yuan respectively, corresponding to 0.87,1.19 and 1.47 yuan per share respectively. With reference to the valuation of the comparable company and taking into account the difference in the valuation of AH shares, the company is given a target price of HK $7.77 at the exchange rate of HK $0.84 (the target price for the previous period is HK $7.77, which remains unchanged on the basis of 7.5 times PE in 2022) and maintains a "better than the market" rating.
Risk hints: the risk of a sharp rise in raw material prices, the risk of falling product prices, and the risk of slowing down economic growth.