Lier Chemical (002258): The price of glufosinate continues to reach a new low expense rate to increase 19H1 performance is gradually expected

Lier Chemical (002258): The price of glufosinate continues to reach a new low expense rate to increase 19H1 performance is gradually expected

The company’s forecast earnings drop by 38 each year.

8% Lier Chemical announced its 2019H1 performance report with operating income of 20.

50,000 yuan, an increase of 12 in ten years.

7%; net profit attributable to parent company1.

600 million, a decrease of 38 every year.

8%, corresponding to a relative profit of 0.

30 yuan, lower than expected earnings.

Considering that the average price of 19H1 glufosinate decreased by 22.

At 6%, we think the company’s sales revenue has increased by 12.

7% is mainly due to increased production.

The net profit exceeded expectations. First, it was affected by the increase in operating costs of the Guang’an base. Second, referring to the first quarter report, we expected the company’s 19H1 expense ratio to also increase significantly at the same time.

Points of concern: The price of glufosinate fluctuates at the bottom, waiting for the peak export season.

The price of glufosinate has been 18 since October 18’s high.

75 million / ton, continued to drop to the current 12.

30,000 yuan / ton.

We believe that the core reason is the expansion of supply. The 7,000-ton capacity of Lier Guang’an Base was put into operation in 18Q4. Shandong Yisheng’s crop has also been improved, and the industry’s periodic excess capacity.

Looking ahead to 19H2, we expect the price to fluctuate at the bottom, but at the same time, the downside is limited.

From the perspective of cost, the format technology currently widely used in China, we judge that the cost is more than 10 thousand tons / ton (excluding tax), so there is limited room for downward price.

After September is the traditional peak export season of the industry, demand has gradually recovered, and glufosinate prices have rebounded weakly.

Expansion + integrated support, Lier strengthened the leading position.

The company’s highest glufosinaldehyde 北京夜网 formaldehyde expansion rate, plans to put one into production in Guang’an.

In addition, the company formulated an integrated layout of the industrial chain, and set up a subsidiary in cooperation with Sancaitang; at the same time, Guang’an Base MDP 1.

5Accelerated construction in the early stage is expected to be put into production within this year.

We believe that companies with an integrated industrial chain layout like Lier will benefit more from future industry competition.

Profenfluramine and fluconazole entered a period of profit release, with small varieties making big profits.

The company’s convertible bond investment projects include propofachlor and fluconazole, two small varieties with strong profitability. We expect to gradually reach production in 2019-2020.

Taking into account the supply and demand pattern of fluconazole and propafluchlor and the current prices, we estimate that the profit after full production will be 3.

About 100 million (floxaconazole 2.

3 ppm, fluroxypyr.

700 million).

Estimates and recommendations Due to lower prices of glufosinate and higher company expense ratios, we set our 2019 / 20e profit forecast from 1.

11/1.

51 yuan down 16% / 1% to 0.

93/1.

50 RMB.

The company currently corresponds to 15/9 times P / E in 2019/20.

Maintain “Outperform” rating and target price of 16.

4 yuan, corresponding to 18/11 times 2019/20 P / E, compared to the current 21% space. Risks Expected from the commissioning of the Guang’an project, the price of glufosinate may change, and other potential risks such as environmental protection and safety.