Xinyangfeng Agricultural Technology Co.Ltd(000902) (000902)
The company is a leader in China’s phosphate and compound fertilizer industry
The company specializes in the research, development, production and sales of phosphorus compound fertilizer and new fertilizer, as well as the supply of modern agricultural related technologies, facilities, equipment, products and services. It has an annual production capacity of 8.3 million tons of various high-concentration phosphorus compound fertilizer and 3.2 million tons of low-grade phosphate rock washing capacity, The capacity of monoammonium phosphate is 1.8 million tons (including 150000 tons of industrial monoammonium phosphate), supporting the production of 2.8 million tons / year of sulfuric acid, 150000 tons / year of synthetic ammonia and 150000 tons / year of nitric acid. From 2014 to 2020, the company’s revenue increased steadily from 8.352 billion yuan to 10.069 billion yuan (the original trade business income was changed to net settlement year by year), CAGR + 3.16%; the net profit attributable to the parent company increased from 571 million yuan to 955 million yuan, CAGR + 8.94%. In the first three quarters of 2021, the company realized an operating income of 9.539 billion yuan, YoY + 15.73%; and the net profit attributable to the parent company was 1.051 billion yuan, yoy + 32.54%.
Recovery of planting prosperity & improvement of concentration, inflection point of demand for compound fertilizer or now
In 2016, the temporary corn storage policy was cancelled, the planting area decreased year after year, the corn inventory had dropped to a low level in 2019, the pig production capacity hit the bottom and rebounded, the poultry chain was booming under the effect of pig and chicken substitution, and the feed demand was good, supporting the corn price to remain high. Wheat and rice are substitutes for corn. Under the background that the price of corn remains high, the demand for substitution is gradually prominent, and the price shows a moderate upward trend. The general rise of major Shenzhen Agricultural Products Group Co.Ltd(000061) prices such as corn, wheat and rice has led to the recovery of the landscape of the planting industry chain. The demand for chemical fertilizer is highly related to the landscape of the downstream planting industry chain. The recovery of the landscape of the downstream planting industry chain will stimulate farmers’ planting enthusiasm and drive the demand for chemical fertilizer to improve. In addition, China’s policies (such as light storage of chemical fertilizer, one-time grain subsidies, etc.) further drive the optimization of chemical fertilizer demand structure, and with the further strengthening of environmental protection supervision, “three phosphorus remediation” The supply side reform has made positive progress, the price of raw materials has fluctuated sharply in the past two years, the backward small and medium-sized production capacity is unsustainable, and the withdrawal of small and medium-sized production capacity has promoted the continuous improvement of industry concentration. From 2011 to 2020, the growth rate of compound fertilizer consumption slowly increased from 44.98 million tons to 51.34 million tons, with an annual compound growth rate of 1.48%, while the company’s compound fertilizer sales increased from 1.8 million tons to 3.66 million tons, with an annual compound growth rate of 8.20%, much higher than the industry average growth rate, and the corresponding market share also increased from 4.63% to 7.13%.
The competition barrier is constantly consolidated, and iron phosphate helps the company grow at a high speed
The company’s products are covered with phosphate fertilizer (mainly monoammonium phosphate), conventional compound fertilizer and new compound fertilizer. The product series are complete in the industry. The multi brand matrix meets the diversified individual needs of dealers and consumers and the demand for high-quality compound fertilizer. As an important driving force for the development of the company, the brand can form a good synergy with promoting the channel layout and continuously improve the company Brand equity and value. Thanks to the company’s location advantages, reasonable supply layout, the right to import potassium fertilizer and the production capacity of 1.8 million tons of monoammonium phosphate, the company has strong cost competition barriers. In addition, there will always be a gap between supply and demand of iron phosphate in the next few years. In 2021, the company announced that it plans to build a 200000 ton iron phosphate project. The first phase of 50000 tons and the second phase of 150000 tons will be put into operation in February 2022 and the end of 2022 respectively. The company has absolute advantages in iron phosphate business and is expected to achieve secondary high growth through iron phosphate business.
Investment advice
Benefiting from the recovery of the downstream planting industry chain, the demand for chemical fertilizer will continue to improve. As the leader of China’s chemical fertilizer, the company has obvious cost advantages. Under the background of upward industry prosperity, the company’s profits are expected to be gradually released. At the same time, the operation of iron phosphate project is expected to increase the company’s profits. We expect that from 2021 to 2023, the company’s operating revenue will be RMB 121.52/140.29/17.405 billion respectively, the net profit attributable to the parent company will be RMB 1.209/16.61/2.326 billion respectively, and the EPS will be RMB 0.93/1.27/1.78 respectively. On November 23, 2021, the stock price will be RMB 16.45, and the corresponding PE will be 18 / 13 / 9x respectively. It will be covered for the first time and given a “buy in” rating.
Risk statement
Shenzhen Agricultural Products Group Co.Ltd(000061) price fluctuation risk, raw material price fluctuation risk and intensified industry competition risk.
