\u3000\u30 China Baoan Group Co.Ltd(000009) 02 Xinyangfeng Agricultural Technology Co.Ltd(000902) )
Key investment points
Event: on April 18, the company released the first quarter report of 2022: in 2022q1, the operating revenue was 4.545 billion yuan, a year-on-year increase of 37.25%, the net profit attributable to the parent company was 407 million yuan, a year-on-year increase of 24.14%, and the net profit deducted from non parent company was 406 million yuan, a year-on-year increase of 25.24%.
Comments:
The boom of main products has increased, boosting the company’s performance. In 2022q1, the company achieved an operating revenue of 4.545 billion yuan, a year-on-year increase of 37.25%, a net profit attributable to the parent company of 407 million yuan, a year-on-year increase of 24.14%, and a net profit deducted from non attributable to the parent company of 406 million yuan, a year-on-year increase of 25.24%. The substantial improvement of the company’s performance mainly benefited from the prosperity of its main business. The gross profit margin of the company in 2022q1 was 20.83%, up 0.33pct year-on-year, up 1.6pct month on month, net profit margin was 12.46%, up 2.12pct year on year, up 1.62pct month on month, roe was 4.58%, up 0.22pct year on year and down 0.28pct month on month. With the support of cost and the boost of international prices, the prosperity of the company’s chemical fertilizer business has improved. According to Zhuo Chuang, the average prices of the company’s main products monoammonium phosphate and compound fertilizer 2022q1 were 3131 yuan / ton and 3365 yuan / ton respectively, with a year-on-year increase of 35% and 42% respectively.
The advantages of industrial chain integration are remarkable, and the profitability is continuously strengthened. The company has an annual sulfuric acid production capacity of 2.7 million tons, an annual synthetic ammonia production capacity of 150000 tons and an annual phosphate rock production capacity of 900000 tons. It also issued 1 billion yuan of convertible bonds and expanded 300000 tons / year of synthetic ammonia. The allocation and expansion of raw material end production capacity promoted the consolidation of the company’s cost advantage and the continuous improvement of its profitability. During 2022q1, the total expense rate of the company was 5.16%, a year-on-year decrease of 1.1pct. Among them, the sales expense rate was 2.43%, a year-on-year decrease of 0.95pct, the management expense (including R & D expenses, comparable caliber) rate was 2.59%, a year-on-year decrease of 0.68pct, and the financial expense rate was 0.13%, a year-on-year increase of 0.52pct.
Cost support superimposed on the boost of international prices, and the price boom of main products rose. On the cost side, according to Baichuan, sulfur, solid particles in Yangtze River port and Hubei factory price of synthetic ammonia, 2022q1 increased by 38.31% and 26.01% respectively year-on-year, boosting the cost of monoammonium phosphate by 18.96% in 2022q1; The price of thermal coal rose, boosted by the news that “Xiaguan fertilizer won the bid of 2.6 million tons”, and the price of urea continued to rise; Potash prices also rose due to the conflict between Russia and Ukraine. Internationally, after the conflict between Russia and Ukraine, Russia restricted the export of chemical fertilizer, which exacerbated the tight supply of international chemical fertilizer. The soaring price of international chemical fertilizer led to the rise of the price of chemical fertilizer in China. According to Zhuo Chuang information, the average prices of the company’s main products compound fertilizer and monoammonium phosphate 2022q1 were 3131 yuan / ton and 3365 yuan / ton respectively, with a year-on-year increase of 35% and 42% respectively.
Open up the upstream and downstream of the industrial chain, and the new capacity of iron and lithium is expected to thicken the company’s performance. The company is committed to enriching upstream resources of phosphorus chemical industry: the company acquired 100% shares of Leibo mining industry held by the controlling shareholder Yangfeng group. Leibo mining industry has a phosphate rock production capacity of about 900000 tons. In addition, Yangfeng Chuyuan, a wholly-owned subsidiary of the company, plans to invest in a comprehensive utilization project of phosphorus chemical industry and phosphate rock associated fluorosilicone resources in Ruichang City, Jiangxi Province, including 1.5 million tons of beneficiation, 300000 tons of phosphoric acid, 250000 tons of purified phosphoric acid 900000 tons of sulfuric acid and other phosphorus chemical upstream and midstream products, as well as 30000 tons of anhydrous hydrogen fluoride, 10000 tons of lithium hexafluorophosphate and other new material projects. And continuously open up the layout of downstream industrial chain: the company invested in the construction of 200000 tons of iron phosphate project in Jingmen, of which the 50000 tons of iron phosphate project in phase I has passed the preliminary approval of environmental impact assessment and energy assessment, and entered trial production, and bound with front-line customers Jiangsu Lopal Tech.Co.Ltd(603906) ; Phase II, together with Gem Co.Ltd(002340) , a leading enterprise in the supply chain of the new energy industry, jointly funded the construction of not less than 150000 tons of iron phosphate per year and not less than 100000 tons of lithium iron phosphate per year, and supported the construction of 1.5 million tons of beneficiation per year, 300000 tons of pyrite to sulfuric acid per year, 400000 tons of sulfur to sulfuric acid per year, 200000 tons of phosphoric acid per year and 300000 tons of slag acid per year; Yangfeng Chuyuan, a wholly-owned subsidiary of the company, has invested and built a production line with an annual output of 100000 tons of iron phosphate and 50000 tons of lithium iron phosphate in Yidu, and a supporting 100000 tons of refined phosphoric acid production line. According to the company’s announcement, the 150000 tons of Zhongxiang phase II and 100000 tons of iron phosphate in Yidu are expected to start trial production in the second half of 2022. With the company’s industrial chain layout becoming more and more complete, and the iron phosphate lithium iron phosphate products are directly bound to the downstream head enterprises, the company is expected to continue to consolidate its cost advantage and benefit from the rapid development of lithium iron phosphate track.
Profit forecast and investment suggestion: according to the launch progress of the company’s new iron phosphate capacity (50000 tons of iron phosphate in Jingmen and Jiangsu Lopal Tech.Co.Ltd(603906) cooperation, 150000 tons of iron phosphate in Gem Co.Ltd(002340) cooperation and 100000 tons of iron phosphate in Yidu, it is estimated that the net profit attributable to the parent company from 2022 to 2024 will be 1.588 billion yuan, 2.044 billion yuan and 2.384 billion yuan respectively, and EPS will be 1.22 yuan, 1.57 yuan and 1.83 yuan respectively. We selected Yunnan Yuntianhua Co.Ltd(600096) , Chengdu Wintrue Holding Co.Ltd(002539) , Sichuan Development Lomon Co.Ltd(002312) , Anhui Sierte Fertilizer Industry Ltd.Company(002538) , Anhui Sierte Fertilizer Industry Ltd.Company(002538) as comparable companies in the field of chemical fertilizer. The average PE of comparable companies in 2022 and 2023 was 14.65 times and 13.15 times (corresponding to the closing price on April 18, 2022), and the current share price corresponding to the PE of the company in 2022 and 2023 was 14.73 times and 11.45 times respectively. We believe that the new energy business is expected to further open the company’s growth space and maintain the “buy” rating.
Risk warning: the downstream demand is less than the expected risk; The new project is less than the expected risk; Safety and environmental protection risks; The data information on which it is based lags behind the risk.
