\u3000\u30 Shenzhen Fountain Corporation(000005) 53 Adama Ltd(000553) )
Event: on the evening of March 30, the company released its annual report for 2021. In 2021, the company achieved a revenue of 31.039 billion yuan, a year-on-year increase of 9.12%, and the net profit attributable to the parent company reached 157 million yuan, a year-on-year decrease of 55.38%. Meanwhile, in 2021, Q4 company achieved a revenue of 8.551 billion, a year-on-year increase of 13.18% and a month on month increase of 15.18%. The net profit attributable to the parent company of Q4 was 161 million yuan, a year-on-year increase of 26.33%, turning losses into profits.
The cost of raw materials and transportation is at a high level, and the rise of selling price and sales volume stabilizes the profit space. Throughout the year, affected by the rise of oil prices and raw material prices, the prices of intermediates and technical drugs purchased from China were high, and there was a further shortage of supply in the third quarter, resulting in a significant rise in the cost of raw materials of the company. Although China’s “double carbon” policy has been relaxed in 21q4, and the supply of intermediates and technical drugs has improved, the price of raw materials is still high. In addition, covid-19 epidemic continued to affect the operation order of the port, the land transportation supply route was also under pressure, and the overall transportation cost increased significantly. Under the dual pressure, the company’s performance in 2021 decreased significantly compared with that in 2020. However, from the perspective of revenue, the company’s annual sales volume in 2021 increased by 12% year-on-year, and the average price of products increased by about 4%.
Among them, the price of 2021q4 products increased by 14% year-on-year, partially offsetting the impact of rising costs Shenzhen Agricultural Products Group Co.Ltd(000061) rising prices have supported strong demand and gratifying results have been achieved in markets around the world. In 2021, the world will continue to be impacted by the epidemic, the bulk Shenzhen Agricultural Products Group Co.Ltd(000061) price will remain high and rise further, and farmers’ planting willingness will be significantly boosted, thus driving the strong demand for plant protection in most regions. The company has significant market highlights in Europe, Latin America, North America, Asia Pacific, India, the Middle East and Africa. In 2021, the sales (at fixed exchange rate) increased by 3.0%, 19.3%, 17.4%, 28.5% and 12.7% respectively. Especially in the Chinese market, thanks to strong market demand and high pricing under limited supply and the promotion of Huifeng acquisition project, the sales of 21q4 in China increased by 81% year-on-year and 59% year-on-year. It is expected to further increase in the future.
Jingzhou base officially resumed production, and its profitability is expected to gradually improve. In November 2021, after a three-year operation facility relocation and upgrading project of the old plant, the company’s Jingzhou base finally resumed production. The new Jingzhou base has advanced environmental protection facilities and meets the international leading environmental protection and safety standards. Subsequently, with the continuous and stable operation of the company’s new plant, Jingzhou base can further receive the new technical drug products of the company’s product line under research, expand the coverage of the product line and improve the overall production efficiency. In addition, with the restoration of the new plant area, the additional procurement costs borne by the company in recent years will be gradually reduced, which is conducive to reducing the negative impact of large non recurring profits and losses caused by shutdown losses on the company’s performance.
Profit forecast, valuation and rating: due to the obvious rise in raw materials and transportation costs, the company’s performance in 2021 is lower than expected. We lowered the company’s profit forecast for 20222023 and added the company’s profit forecast for 2024. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be 5.70 (down 45.9%) / 7.59 (down 39.1%) / 865 million yuan respectively. We are still optimistic about the gradual improvement of the company’s performance and the maintenance of the company’s “buy” rating under the background of the high prosperity of the agrochemical industry and the gradual easing of the pressure on the supply side.
Risk tip: raw materials and transportation costs fluctuate, downstream demand is less than expected, and capacity recovery is less than expected.
