Lier Chemical Co.Ltd(002258) (002258)
The company is optimistic about the continuous optimization of the production process of glufosinate and the continuous improvement of the competitive advantage of glufosinate, so as to maintain the buy rating.
Key points supporting rating
The company’s performance in 2021 slightly exceeded expectations. In 2021, the company expects to realize a net profit attributable to the parent company of RMB 1 billion – 1.08 billion, with a year-on-year increase of 63.34% – 76.41%; In the fourth quarter, the net profit attributable to the parent company is expected to be RMB 388-468 million in a single quarter, with a significant year-on-year increase of 96.68% – 139.60%.
The price of glufosinate rose sharply, and the refined glufosinate technical drug was successfully registered. With the continuous promotion of glufosinate resistant transgenic crops in recent years, according to Zhongnong Zongheng, the global glufosinate market sales will be US $1.05 billion in 2020. In 2020, the average price of glyphosate was 138400 yuan / ton, a year-on-year increase of 12.26%. In 2021, the average price of glufosinate was 244000 yuan / ton, an increase of 76.24% year-on-year; Among them, the average price in the fourth quarter was 354900 yuan / ton, up 118.72% year-on-year and 39.33% month on month in the fourth quarter. At present, the company is the largest and lowest cost manufacturer of glufosinate technical drugs and intermediates in China, which has benefited the most from this round of price increase. From the perspective of competitive strength, in 2020, the company obtained the production license of refined glyphosate, conducted trial production, achieved success, and achieved mass production. L-glufosinate is an effective body that can really exert herbicidal activity and is the development direction of glufosinate industry in the future. According to the previous EIA announcement, the company plans to invest a total of about 2 billion yuan to build a “new pesticide production plant and supporting facilities construction project with an annual output of 42000 tons”, including 30000 tons of l-glufosinate. With the gradual advancement of MDP and PMG projects, the company’s voice in PMG industry will be further enhanced.
Reserve several potential varieties, resume production in Mianyang base, and look forward to long-term growth. In 2020, the company carried out the technical transformation of propargyl fluoxamine, and the product quality and production capacity were improved after the technical transformation. In addition, according to the EIA information, in addition to fluconazole, the company also reserves a number of potential varieties such as chloramphetamine benzamide, which will gradually open up long-term growth space. In addition, the company announced on October 28, 2021 that the production line of Mianyang base has gradually resumed production except for fluconazole and alkyne. With the gradual full production of glyphosate in Mianyang base, it is expected that the company may continue to benefit from the simultaneous rise in the volume and price of glyphosate and other products in the first quarter of 2022, and the profit level will remain high.
Valuation
As the price of glyphosate remains high, it is estimated that the earnings per share from 2021 to 2023 will be 1.97 yuan, 2.55 yuan and 2.69 yuan respectively, corresponding to 16.9 times, 13.0 times and 12.4 times of the current PE respectively. In the future, the cost of glyphosate will decrease and the profit will increase, so as to maintain the company’s buy rating.
Main risks of rating
The project is not put into operation as expected; Risk of large fluctuations in product prices.
