\u3000\u30 China Baoan Group Co.Ltd(000009) 11 Nanning Sugar Industry Co.Ltd(000911) )
Key investment points
Event: the company released the annual report of 2021 and the first quarterly report of 2022. In 2021, the operating revenue was 3.233 billion yuan, a year-on-year decrease of 8.85%, and the net profit attributable to the parent company was – 53.65 million, a year-on-year decrease of 222.35%; In the first quarter, the operating revenue was 807 million, a year-on-year decrease of 10.5%, and the net profit attributable to the parent company was – 52.06 million, a year-on-year decrease of 1080.9%.
The company’s poor performance in 2021 is mainly due to (1) the rapid rise of costs, including the sharp rise in the price of various auxiliary materials, and the company’s development of sugarcane planting and increase of sugarcane support investment; (2) In 2021, the company implemented the new lease accounting standards, and the circulation of leased land significantly increased the book use right assets and lease liabilities, and also increased the interest of lease liabilities, resulting in an increase in financial expenses; (3) The company’s orders and prices of epidemic prevention materials decreased year-on-year, resulting in a year-on-year decrease in the gross profit of epidemic prevention materials. Among them, the melt blown cloth business suffered a large loss.
The performance of 2022q1 company fell sharply year-on-year, mainly due to (1) the decrease of white sugar sales and the year-on-year decrease of sugar production rate by 1.31%, resulting in an increase of 440 yuan in sugar cost and an increase in the price of auxiliary materials, raising the cost per ton of sugar; (2) The sales of inventory decreased according to the sales plan, resulting in an increase of 215.71% over the beginning of the year.
On April 24, Nantong announced that it plans to plan major asset replacement and related party transactions, mainly because the company plans to replace 100% of the equity of Xiangshan sugar company, a wholly-owned subsidiary, with 100% of the equity of bosun company jointly held by agricultural investment group and its related party LvHua company. The way to make up the difference in replacement value shall be negotiated by all parties separately, but it does not involve the issuance of shares by the company.
Investment advice: maintain the “buy” rating. The company’s performance in 2021 and 2022q1 was poor due to the low sugar price and rising costs. However, we saw the company’s positive measures such as upgrading product categories, increasing characteristic red granulated sugar, optimizing staff size, reducing inventory turnover and so on. With the upward shift of the focus of sugar price and the stabilization of the non sugar sector, as well as the smooth progress of the company’s asset replacement, we expect the company to improve significantly in the second half of the year. It is estimated that the operating revenue from 2022 to 2024 will be 3.59/47.2/5.65 billion yuan, the net profit will be 173/4.38/642 million yuan respectively, and the corresponding PE of the current stock price is 20.13/7.93/5.41 times respectively Maintain buy rating.
Risk warning: Shenzhen Agricultural Products Group Co.Ltd(000061) price fluctuation risk, natural disaster risk, risk of changes in industrial and government policies, and the public data used in the research report may be delayed or not updated in time.
