2021-10-28Li Ji and Ren Jie of Debon Securities Co., Ltd. conducted research on Yangnong Chemical and released the research report "2021 Third Quarterly Report Review: Steady Growth in Single Quarter performance, Medium- and Long-term Growth Determination", this report gives a buy rating to Yangnong Chemical, and the current stock price is 115.07 yuan.
Yangnong Chemical (600486)
Investment essentials
Event: On October 25, the company released the third quarter report of 2021, in the first three quarters of 2021, the company achieved operating income of 9.242 billion yuan, an increase of 16.15% year-on-year; achieved a net profit attributable to the mother of 1.016 billion yuan, a year-on-year decrease of 0.75%, deducting non-attributable net profit of 988 million yuan, an increase of 3.66%; of which 2021Q3 achieved a net profit attributable to the mother of 224 million yuan, an increase of 14.11% year-on-year, and a net profit of 219 million yuan, an increase of 59.80% year-on-year.
With volume up prices, the performance under the traditional off-season achieved steady growth. In the third quarter of 2021, the company achieved operating income of 2.559 billion yuan, an increase of 25.49% year-on-year; realized a net profit attributable to the mother of 224 million yuan, an increase of 14.11% year-on-year, and a net profit of 219 million yuan after deduction of non-attributable net profit, an increase of 59.80% year-on-year. With the gradual release of the production capacity of the third phase of the Youjia project, the company's main products are more productive and fast-selling, and the sales volume of the company's insecticides and herbicides in the first three quarters of 2021 was 14,300 tons and 44,200 tons, respectively, an increase of 15.93% and 12.77% respectively; the price of the company's main products other than glyphosate continued to be low, and the average price of the company's insecticides and herbicides in the first three quarters of 2021 was 179,300 yuan / ton and 44,100 yuan / ton, respectively, down 7.44% and 1.70% year-on-year. The prices of the main raw materials formaldehyde, toluene, isobutyral and other raw materials increased by 31%, 25% and 109% respectively year-on-year, and the continuous high price of raw materials led to a decline in the company's profit margin. In the first three quarters of 2021, the company's gross profit margin was 23.25%, down 3.05pct year-on-year; net profit margin was 11.00%, down 1.87% year-on-year. As pesticide prices stabilize and recover, the company's profit margin is expected to increase.
The production capacity of Youjia Phase III was gradually released to contribute to the increase in performance, and the fourth phase of Youjia was steadily advancing. The third phase of the Youjia project began trial production in 2020Q3, undertaking the transformation and upgrading of some pesticide projects in the Dalian Road plant area of Youshi, and gradually releasing the production capacity in 2021 to contribute to the increase in performance. Youjia Phase IV has completed the administrative approval of filing, safety assessment, environmental impact assessment and other administrative approvals, and is currently in the construction stage, as of September 30, 2021, the company's construction projects are 442 million yuan, an increase of 39.43% over June 30. The steady progress of the Youjia project has injected strong development momentum into the company.
The 10 billion Huludao project was signed, and the medium- and long-term growth can be expected. According to the official website of the Huludao government, Yangnong Chemical has invested a total of 10 billion yuan to build a large-scale pesticide fine chemical project in the Huludao Economic Development Zone, which is expected to start construction in March 2022 and trial production at the end of 2022. At the same time, the company will rely on the world's largest plant protection platform Syngenta Group, and develop in synergy with international agrochemical giants such as Syngenta and Adama, complement each other's advantages, and is expected to create an efficient global industrial chain, fully benefit from the restructuring of the two modernizations, and move towards a new stage of development.
Investment advice: The company's earnings per share in 2021-2023 are expected to be 4.85, 5.90 and 7.08 yuan, respectively, corresponding to PE of 24, 20 and 16 times, respectively. Referring to the current average PE level of 24 times in the SW pesticide sector, considering the continuous release of new production capacity in the Youjia Phase III project, the Youjia Phase IV project is steadily advancing, which will provide more growth opportunities for the company, inject strong impetus into the company's development, and maintain the "buy" rating.
Risk Warning: The approval and construction of new projects are less than expected; the risk of product price fluctuations; and the risk of exchange rate fluctuations.
A total of 22 institutions have given ratings and 22 buy ratings in the last 90 days; the average target price of institutions in the past 90 days has been 145.78; the Securities Star Valuation Analysis Tool shows that Yangnong Chemical (600486) good company rating is 3.5 stars, good price rating is 2.5 stars, and valuation comprehensive rating is 3 stars.