China Securities International: Sinochem Fertilizer "buy" rating target price HK $1.6

China Securities International issued a research report that it is expected that Sinofert (1.18, 0.01, 0.85%) (00297) 25-27 years of net profit will reach 12.3/13.8/1.53 billion, an increase of 15.5%/12.4%/10.8%. The bank is optimistic about the development of biological + new fertilizers of Sinochem fertilizer, sales continue to optimize, and profit margins increase year by year. Finally, the target price was raised to HK $1.6 with a "buy" rating.

The main points of view are as follows:

Performance in line with expectations

In 2024, Sinoferter achieved operating income of 21.27 billion yuan, a decrease of 2.1% year-on-year, and net profit of 1.06 billion yuan returned to the mother, an increase of 69.5%. Gross profit margin was 12.0%, up 1.6 percentage points year-on-year, and net profit margin was 5%, up 2.1 percentage points year-on-year. Earnings per share of 0.15 yuan, dividend per share of 0.05 yuan.

Growth Business is doing well

In 2024, the revenue of the company's basic business, growth business and production business will reach 108.7/80.2/2.38 billion, with a year-on-year change of -4%/+2%/-7%, accounting for 51%, 38%, 11%. Basic business revenue decreased 470 million yuan year-on-year, affected by two shocks in the potash market price throughout the year, the average sales price decreased by 16% year-on-year. Revenue from the growth business increased by 180 million yuan and profit increased by 45% year-on-year, as the company's bio + strategy achieved good results and sales volume of high-end compound fertilizer increased significantly. Production segment revenue decreased by RMB170 million due to a significant decline in the prices of synthetic ammonia and urea at Sinochem Changshan.

Biofertilizers became an important driving force for the company's development

In 2024, the company's biological fertilizer revenue of 4.3 billion, an increase of 19%, accounting for 22% of the overall revenue, gross profit accounted for 36%. In 24 years, the sales volume of bio-fertilizer reached 1.35 million tons, an increase of 24%, and the company launched products such as bio-compound fertilizer, biologics, bio-phosphorus/potash fertilizer. The bank believes that Sinochemical attaches great importance to research and development, and its biofertilizers have obvious performance in stress resistance, quality improvement and increased crop yield, and user reputation and industry influence have been increasing, and biofertilizers have become the main driving force for performance growth.

Risk warning: industry competition intensifies; The price is lower than expected.

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