\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 096 Yunnan Yuntianhua Co.Ltd(600096) )
Event: on the evening of April 6, the company released the announcement of pre increase of performance in the first quarter of 2022. In the first quarter of 2022, the company expects to realize a net profit attributable to the parent company of 1.64 billion yuan, with a year-on-year increase of 185.2% and a month on month increase of 104.6%; It is expected to realize a net profit of RMB 1.588 billion after non deduction, with a year-on-year increase of 223.7% and a month on month increase of 107.5%.
Comments:
The demand for chemical fertilizer outside China continued to be strong, and the company’s Q1 performance greatly exceeded expectations
In Q1 2022, the prices of phosphate fertilizer and compound fertilizer in China remained high, among which the prices of diammonium phosphate, monoammonium phosphate, urea, compound fertilizer, yellow phosphorus and phosphate rock increased by 38.2%, 36.9%, 33.2%, 43.3%, 103.9% and 70.8% respectively year-on-year. At the same time, the strong demand for spring ploughing and the needs of reserve tasks such as “light fertilizer storage” and “summer fertilizer management” have effectively improved the sales of the company in the Chinese market.
In terms of export, due to the covid-19 epidemic and the geopolitical conflict between Russia and Ukraine and other factors, there is great uncertainty in the global food supply, resulting in higher international food prices, which pushes up farmers’ planting willingness and drives the demand for chemical fertilizer. At the same time, Russia is also a major exporter of chemical fertilizer in the world. Due to the sanctions imposed by European and American countries on Russia, the international chemical fertilizer supply also suffered a significant contraction, which further exacerbated the tension between international chemical fertilizer supply and demand and promoted the continuous rise of prices, thus driving the rise of the export prices of China’s phosphate fertilizer, urea and other products. According to the data of the General Administration of customs, the average export prices of monoammonium phosphate, diammonium phosphate and urea in China from January to February 2022 increased by 2.9%, 3.9% and 13.3% respectively compared with Q4 in 2021. In the follow-up, on the premise of meeting the “guaranteed supply and stable price” of China’s chemical fertilizer, China’s phosphate fertilizer export restrictions are expected to be liberalized. As China’s largest phosphate fertilizer and phosphate chemical enterprise, the company will fully benefit and help the company’s performance rise further.
In terms of production costs, based on the advantages of the company’s integrated industrial chain, the company is highly self-sufficient in raw materials such as phosphoric acid and synthetic ammonia. At the same time, benefiting from the strategic reserve and procurement of other bulk raw materials, the company has effectively alleviated the negative impact of the price rise of sulfur, coal and other raw materials on production costs, so that the profitability of the company’s main businesses such as chemical fertilizer and chemical raw materials is still at a high level. In addition, the improvement of the operating performance of the company’s participating subsidiaries also had a positive impact on the company’s investment income during the reporting period.
Join hands with industry leaders to accelerate the transformation of new energy in phosphorus chemical industry
At present, the company plans to have “500000 T / a iron phosphate battery new material precursor and supporting projects”, of which the production capacity of phase I 100000 t / a iron phosphate and supporting projects is expected to be completed and put into operation by the end of June 2022, and the production capacity of the remaining 400000 T / a iron phosphate and supporting projects is expected to be completed and put into operation by the end of December 2023. Meanwhile, in February 2022, the company signed the cooperation agreement on the whole industry chain project of new energy batteries with the people’s Government of Yuxi City, Yunnan Province, Yunnan Energy New Material Co.Ltd(002812) , Eve Energy Co.Ltd(300014) , Huayou holdings and other partners to lay out the whole industry chain of new energy batteries. Based on the company’s own resource advantages, phosphorus chemical industry chain advantages, experience advantages and the strong strength of partners, the company will have strong competitive strength and cost advantages in the field of new energy, and is expected to realize the rapid growth of related businesses under the tide of new energy industry.
Profit forecast, valuation and rating: benefiting from the rise in product prices and strong demand from markets outside China, the company’s Q1 performance in 2022 greatly exceeded expectations. We believe that the subsequent fertilizer industry is still expected to maintain a high prosperity. We raise the company’s profit forecast for 20222023 and add a 24-year profit forecast. It is estimated that the net profit attributable to the parent company in 20222024 will be 45.0 (up 21.3%) / 47.7 (up 24.9%) / 5 billion yuan respectively. The current share price corresponds to about 11 times of PE in 2022. We still maintain the company’s “buy” rating.
Risk tip: product price fluctuation risk, lower downstream demand than expected, new energy material capacity construction risk, safety production and environmental protection risk.
