Lier Chemical (002258) 2019 Interim Report Comment: Falling glufosinate prices dragged performance and new projects continued to grow for a long time
I. Overview of the incident The company released its 2019 Interim Report on August 16, the report states that the company achieved revenue of 20.
53 ppm, an increase of 12 in ten years.
68%; net profit attributable to mothers1.
60 ppm, a decrease of 38 per year.
80%; net profit after deduction to non-returned mother1.
61 ppm, a decrease of 39 per year.
28%; basic return is 0.
30 yuan, a reduction of 38 per year.
Second, analyze and judge the short-term performance pressure caused by the decline in the price of glufosinate cations. The long-term development of high-quality leading companies can achieve revenue of 20 in 2019H1.
5.3 billion, an increase of 12.
68%, net profit attributable to mother 1.
60 trillion, with a decrease of 38.
80%; of which the second quarter achieved revenue of 10 in a single quarter.
3.5 billion, net profit attributable to mother 0.
88 ppm, a slight increase from the previous quarter; comprehensive gross profit margin was 29.
17%, a decrease of 2 over the same period last year.
At the report scale, the company actively explored the market resulting in a slight increase in revenue. However, due to factors such as the price of products affected by fierce market competition, the increase in operating costs of the Guang’an base, and the rise in the prices of some raw materials, its profitability was under short-term pressure.
Among them, glufosinate cation, which is the core product, due to increased planned production capacity, overlapped demand during the off-season mainstream manufacturers started high, the price continued to fall, the average price in 2019H114.
80,000 yuan / ton, down 24.
2%, currently has fallen to 10.
5 million / ton, located in historical area.
However, considering the superiority of glufosinaldehyde itself, coupled with increased demand for space, the price is expected to gradually recover in the future. The company will also benefit from the increased concentration of the industry and the reduction of production costs in the long run.
The Guang’an project accelerates and opens up the future growth space The company is fully pushing forward the construction of the original drug production line and supporting facilities of the Guang’an production base. Among them, the 7,000-ton capacity of glufosinate promotes the gradual commissioning of the year. Its Bayer process route has a cost advantage; 1,000 tons /Prochlorfen has been resumed in May this year. The current market price remains at 60 million tons / ton, and profitability has shifted. 1,000 tons / year fluconazole is also expected to be completed within the year. Due to the shortage of domestic supplies, the price has been reduced.Completed the increase to 850,000 / ton, the company’s supplementary production capacity will effectively replace market vacancies.
In addition, the Guang’an Base invested a total of 1 billion yuan in new construction1.
5 Toluylmethyl dichloride, phosphorus-containing flame retardant and L glufosinate production line and supporting engineering projects, the construction period is 3 years, of which 1.
5 Fluorinated methyl phosphorous dichloride is progressing in an orderly manner, and is expected to reach production in June 2020; 2000 tons of phosphorus-containing flame retardants (Phase 1), and 3,000 tons of L-glyphosate (Phase 1) production lines are expected to start from 2020Construction will start in January 2022, and production will be reached in January 2022. It is estimated that after the project is completed, it will increase revenue by about 7.
600 million, gross profit is about 1.
3.7 billion yuan.
The company’s product range around glufosinate will be further expanded, and high growth is expected in the future.
Actively distribute upstream and downstream, continue to optimize the industrial chain. In order to strengthen the control of key upstream raw materials and increase production bases in the central region, the company plans to invest US $ 2 billion in new fine chemical products, new materials, efficient and safe pesticides, and establish joint venture subsidiaries.Jingzhou Sancaitang undertakes the business of grass-formaldehyde raw materials.
In 都市夜网 October 2018, the company successively increased its capital and acquired shares to become the controlling shareholders of SECCO and STAR-Chlorine and Alkali, in order to strengthen control over important pesticide intermediates, ensure raw material supply, and further optimize its own industrial chain.
Third, investment recommendations We expect the company’s EPS in 2019-2021 to be 0.
91 yuan, 1.
23 and 1.
49 yuan, corresponding to PE is 13X, 9X and 8X respectively, with reference to the current average PE level of 20 times of the SW pesticide sector, maintaining the “recommended” level.
Fourth, risks suggest that the price of glufosinate has fallen sharply; product demand is lower than expected; project progress is not up to expectations.