\u3000\u30 China Baoan Group Co.Ltd(000009) 02 Xinyangfeng Agricultural Technology Co.Ltd(000902) )
Event 1: on the evening of April 11, the company released its annual report for 2021. In 2021, the company achieved a revenue of 11.802 billion yuan, a year-on-year increase of 17.21%, and the net profit attributable to the parent company reached 1.210 billion yuan, a year-on-year increase of 28.22%. Meanwhile, in 2021, Q4 company achieved a revenue of 2.263 billion yuan, a year-on-year increase of 23.92% and a month on month decrease of 20.15%. The net profit attributable to the parent company of Q4 was 159 million yuan, a year-on-year increase of 5.48% and a month on month decrease of 54.61%.
Event 2: on April 8, the company announced that Yangfeng Chuyuan New Energy Technology Co., Ltd. (hereinafter referred to as “Yangfeng Chuyuan”), a wholly-owned subsidiary of the company, plans to invest in the construction of a comprehensive utilization project of phosphorus chemical industry and phosphorus ore associated fluorosilicone resources in Ruichang City, Jiangxi Province. The total planned investment of the project is 6 billion yuan, and the source of project funds is the company’s own funds.
Comments:
Benefiting from the rising price of phosphorus and compound fertilizer, the performance improved steadily in 2021. With the cost support given by the sharp rise in the price of upstream raw materials, the sales unit price of compound fertilizer and phosphate fertilizer increased by 17.2% and 42.9% respectively year-on-year in 2021, which led to the overall revenue of the company’s phosphate compound fertilizer business increased by 17.4% year-on-year. In terms of sales volume, due to the flood disaster in North China Plain, China’s grain planting demand shrank in 2021, resulting in a decline in the demand for compound fertilizer. According to the data of Baichuan Yingfu, the output of compound fertilizer in China fell by about 12.55% year-on-year in 2021. In this context, the company’s compound fertilizer business bucked the trend and achieved growth. In 2021, the company’s compound fertilizer sales increased by about 4.7% year-on-year. In Q4 of 2021, dealers had some resistance to the price of compound fertilizer in the short term. In addition, there was still some surplus of low-cost products at the dealer end in the early stage, and the transmission of compound fertilizer cost was subject to certain resistance, resulting in the decline of the company’s Q4 performance in 2021. In the follow-up, due to the impact of the situation in Russia and Ukraine on global food prices, the consumption demand of agricultural materials is expected to further increase, and the chemical fertilizer industry is still expected to maintain a high boom. In addition, due to the consumption of low-cost inventory at the dealer end, the company can effectively transmit the production cost, promote the profitability of phosphate and compound fertilizer business to recover compared with 2021q4, and drive the company to maintain steady growth in overall performance.
It is planned to invest 6 billion yuan to build Jiangxi project and expand the layout of new energy industry chain. Among the projects invested and constructed by Yangfeng Chuyuan, a wholly-owned subsidiary, phosphorus chemical projects include 1.5 million tons / year of beneficiation, 300000 tons / year of phosphoric acid, 250000 tons / year of purified phosphate rock, 900000 tons / year of sulfuric acid, 100000 tons / year of high-grade flame retardant, 100000 tons / year of potassium dihydrogen phosphate, 200000 tons / year of slag acid fertilizer and 1.5 million tons / year of comprehensive utilization of phosphogypsum; Fluorosilicone chemical projects include 30000 tons / year of anhydrous hydrogen fluoride and 20000 tons / year of white carbon black; New energy projects include 10000 t / a capacity of lithium hexafluorophosphate. After the implementation of the project, on the one hand, it provides sufficient raw material guarantee for the production of the company’s products at the upstream raw material end, on the other hand, it adds new new energy material products such as lithium hexafluorophosphate at the downstream product end, further expanding the layout of the company’s new energy industry chain. In addition, the project site is located in Ruichang, a county-level city under the jurisdiction of Jiujiang City, Jiangxi Province, adjacent to the Yangtze River, so the logistics is convenient and the logistics cost is low. At the same time, Jiangxi Province also has many high-quality new energy enterprises, which is conducive to the company’s nearby sales of relevant products and provides an opportunity for the company to carry out project cooperation with local new energy enterprises.
Multi party cooperation in the layout of phosphorus based new energy materials to accelerate the transformation of new energy business. Since 2021, the company has successively invested in the construction of iron phosphate production bases in Zhongxiang, Hubei and Yidu, Hubei, with a total investment of 6 billion yuan for the construction of 300000 tons of iron phosphate, 150000 tons of lithium iron phosphate and related supporting projects (including equity participation projects). The 200000 ton iron phosphate project is constructed by the company in cooperation with Jiangsu Lopal Tech.Co.Ltd(603906) subsidiaries and Gem Co.Ltd(002340) subsidiaries. The 50000 ton project in phase I has entered trial production at the end of March 2022, and the 150000 ton project in phase II will be put into operation from August to December 2022. In January 2022, the company signed the investment / service agreement for investment promotion projects with Yidu Municipal People’s government, which plans to invest 3 billion yuan to build 100000 tons of iron phosphate and 50000 tons of lithium iron phosphate production lines in Yidu chemical park, and build 100000 tons of refined phosphoric acid production lines at the same time. At the same time, the company also participated in the 100000 t / a lithium iron phosphate project led by Gem Co.Ltd(002340) lead. The company cooperates with many parties to strive to jointly build a global competitive whole industry chain of new phosphorus chemical and new energy materials, seize market development opportunities and broaden the growth space of the company.
Profit forecast, valuation and rating: benefiting from the rising price of phosphorus and compound fertilizer products, the company achieved steady growth in 2021, and the overall performance was in line with expectations. At present, the phosphate fertilizer and phosphate chemical industry is still in a high boom. With the effective transmission of raw material costs, we expect the company’s product prices and profitability to rise further. We raised the company’s profit forecast from 2022 to 2023 and added the profit forecast for 2024. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be 16.63 (up 7.7%) / 23.04 (up 12.6%) / 2.694 billion yuan respectively. The current share price corresponds to about 15 times of PE in 2022. We still maintain the company’s “buy” rating.
Risk tip: the price of products and raw materials fluctuates, the capacity construction is less than expected, the downstream demand is less than expected, and the landing of cooperation projects is less than expected.
