\u3000\u3 China Vanke Co.Ltd(000002) 391 Jiangsu Changqing Agrochemical Co.Ltd(002391) )
Event: on April 18, 2022, Jiangsu Changqing Agrochemical Co.Ltd(002391) released the annual report of 2021 and the first quarterly report of 2022: the operating revenue in 2021 was 3.765 billion yuan, a year-on-year increase of 25.15%; The net profit attributable to the parent company was 249 million yuan, a year-on-year increase of 27.48%; The weighted average return on net assets was 5.53%, an increase of 1.05 percentage points year-on-year. The gross profit margin of sales was 17.51%, a year-on-year decrease of 0.77 percentage points; The net profit margin of sales was 6.60%, an increase of 0.10 percentage points year-on-year. The net cash flow from operating activities was 429 million yuan, a year-on-year increase of 23.50%.
Among them, Q4 achieved a revenue of 1.164 billion yuan in 2021, a year-on-year increase of + 65.57% and a month on month increase of + 54.04%; The net profit attributable to the parent company was 13 million yuan, turning losses into profits year-on-year, with a month on month ratio of – 82.54%. The weighted average return on net assets was 0.28%, up 0.77 percentage points year-on-year and down 1.36 percentage points month on month. The gross profit margin of sales was 11.74%, with a year-on-year increase of 7.91 percentage points and a month on month decrease of 10.12 percentage points; The net sales interest rate was 1.01%, up 4.24 percentage points year-on-year and down 8.62 percentage points month on month.
In 2022, Q1 achieved a revenue of 914 million yuan, a year-on-year increase of + 24.30%, and a net profit attributable to the parent company of 80 million yuan, a year-on-year increase of + 41.49%. The weighted average return on net assets was 1.76%, with a year-on-year increase of 0.47 percentage points; The gross profit margin of sales was 21.50%, with a year-on-year increase of 0.17 percentage points; The net profit margin on sales was 8.82%, up 1.09 percentage points year-on-year.
Comments:
In 2021, product sales increased significantly, which became the main contributor to performance growth
In 2021, the company’s performance ushered in a substantial growth, realizing an operating revenue of 3.765 billion yuan, a year-on-year increase of 25.15%; The net profit attributable to the parent company was 249 million yuan, a year-on-year increase of 27.48%. The high-speed growth of performance is mainly due to the significant increase of product sales of the company. In 2021, the company’s original drug sales reached 19923 tons, with a year-on-year increase of 39.8%; The sales volume of preparations reached 11737 tons, a year-on-year increase of 17.4%. The average price of technical drug was 116600 yuan / ton, a year-on-year increase of – 0.8%; The average price of the preparation was 46300 yuan / ton, a year-on-year increase of + 2.9%. From the perspective of the revenue of specific products, the three major pesticide products have achieved positive growth. Pesticide / herbicide / fungicide business achieved revenue of RMB 1.693/1.524461 billion respectively, with a year-on-year increase of 20% / 26.5% / 50.2% respectively.
In terms of period expense rate, the company’s period expense rate in 2021 was 10.73%, with a year-on-year increase of -0.82pct. The sales / management / financial expense ratio was 1.81% / 7.74% / 1.17% respectively, with a year-on-year increase of -0.17 / – 0.97 / + 0.31pct. The increase of financial expense rate is mainly due to the increase of working capital loans and interest expenses during the construction of Changqing Hubei production base. In 2021, the net cash flow from the company’s operating activities reached 429 million yuan, a year-on-year increase of 23.5%. Meanwhile, the company’s inventory at the end of the period reached 1.136 billion yuan, with no significant change compared with – 3.22% at the end of 2020.
The performance of 2021q4 was dragged down by the rise in raw material prices, and the performance of 2022q1 improved significantly
In 2021q4, the company achieved a revenue of 1.164 billion yuan, a year-on-year increase of + 65.57% and a month on month increase of + 54.04%; However, the net profit attributable to the parent company was 13 million yuan, with a year-on-year increase of – 93.47% and a month on month increase of – 82.54%. According to our analysis, the company’s profit was damaged mainly due to the rise in the price of upstream raw materials. In the second half of 2021, the purchase prices of the company’s five main raw materials changed by + 41.6% / 0.5% / – 4.8% / 47.8% / 4.8% respectively compared with the first half of the year. The gross profit margin of 2021q4 company was only 11.74%, down 10.12 percentage points month on month, and the net sales profit margin was 1.01%, down 8.62 percentage points month on month.
In 2022, Q1 achieved a revenue of 914 million yuan, a year-on-year increase of + 24.30%, and a net profit attributable to the parent company of 80 million yuan, a year-on-year increase of + 41.49%. The gross profit margin of sales was 21.50%, with a year-on-year increase of 0.17 percentage points; The net profit margin on sales was 8.82%, up 1.09 percentage points year-on-year. The substantial increase in revenue and profit in the first quarter was mainly due to the conversion of some new projects to fixed assets in the fourth quarter of last year and the contribution of revenue in the first quarter of 2022. We believe that, on the one hand, with the warming weather after the Spring Festival, the demand for planting and medication in the downstream rebounded. Although the prices of major pesticide products were corrected month on month in the first quarter, they improved year-on-year, and the profitability of the industry was repaired with the decline of upstream raw material prices. Generally speaking, April to June is the traditional peak season for pesticide sales. It is expected that the company’s performance is expected to maintain growth with the growth of downstream demand.
New projects are gradually put into operation in large quantities to ensure the medium and long-term growth of the company
By the end of 2021, the company’s Evergreen Nantong convertible bond raised investment project with an annual output of 6000 tons of dicamba technical drug project has been put into trial production; The project with an annual output of 2000 tons of 2,6-diisopropylaniline and the project with an annual output of 2000 tons of Kungfu pyrethrin technical drug in Changqing Hubei production base have been put into trial production. The project with an annual output of 600 tons of fipronil technical drug has entered the stage of pressure test and leakage test, and the project with an annual output of 3000 tons of thiamethoxam technical drug is in the stage of equipment installation. In 2022, the company determined that the operating revenue budget was 4.8 billion yuan, an increase of 27.50% over 2021, and strive to achieve synchronous growth in the net profit attributable to the parent company in 2022. It is expected that the production volume of new projects will bring new increment to the company’s performance in 2022 and ensure the realization of the company’s performance goal in 2022.
In addition, according to the company’s 2021 annual report, the project initiation and filing procedures of the project with an annual output of 16500 tons of pesticide technical drugs and 20000 tons of chemical intermediates planned in the second phase of Changqing Hubei base have been completed. In 2022, the company will continue to accelerate the construction of the project with an annual output of 3500 tons of glyphosate technical drug and 1000 tons of bifenthrin technical drug in Changqing Hubei production base, so as to promote the early completion of production and efficiency. The completion and operation of Changqing Hubei production base will provide a strong guarantee for the future performance growth of the company.
In view of the company’s historical profitability and future development plan, we adjusted the company’s profit forecast. It is estimated that the company’s net profit attributable to the parent company in 2022, 2023 and 2024 will be 366, 513 and 603 million yuan respectively, and EPS will be 0.56, 0.78 and 0.92 yuan / share, corresponding to 14, 10 and 8 times of PE, maintaining the “buy” rating.
Risk tips: the risk of project construction falling short of expectations, the risk of price decline of main products, the risk of price fluctuation of main raw materials, the risk of international trade friction, the risk of environmental protection and safety production, and the risk of intensified competition in the same industry.
