(1) General situation of the company's business

The company's main business is research and development, production and sales of pesticide products. The research and development work is mainly divided into the research and development of innovative pesticides, the research and development of imitation pesticides and the technical improvement of existing production processes. After the acquisition of the Agricultural Research Company during the reporting period, the company's research and development capabilities in innovative pesticides have been greatly improved. The products produced by the company cover pesticides, herbicides and fungicides. Insecticides mainly include pyrethroid products, herbicides mainly include glyphosate and dicamba, and fungicides mainly include fluazinam and azoxystrobin. Company sales are divided into raw material drug sales and preparation distribution. After the acquisition of Sinochem crops during the reporting period, the sales of pesticide preparations of the company showed rapid growth.

The pesticide industry is seasonal, and the peak season in the northern hemisphere is mainly in the first half of the year, and the peak season in the API market is earlier than that in the preparation market. The company mainly produces and sells pesticide raw materials, and its customers are mainly downstream preparation processing and sales enterprises, so the domestic sales season of the company is generally the first half of the year.

The pesticide industry is greatly influenced by climatic conditions, and the complex and changeable climate affects the cultivation of crops, which in turn affects the demand for pesticides. The company strives to enrich the varieties of pesticides, balance the pesticide market, and hedge the adverse effects of climate through multiple varieties and markets.

Pesticide is an indispensable means of production in agricultural production. For a long time, pesticides have played an extremely important role in controlling diseases, pests and weeds, protecting the safe growth of crops, increasing crop yield and promoting the sustained and stable development of the national economy. However, at present, the concentration of domestic pesticide industry is not high, and it is small and scattered. Most of the pesticides produced are inefficient and highly toxic, and the unscientific use of pesticides has had some adverse effects. Therefore, the Ministry of Agriculture has put forward the goal of achieving zero growth in pesticide and chemical fertilizer consumption by 2020, and there is great room for the development of high-efficiency and low-toxicity pesticides in the future.

The development potential continues to increase.

In 20 19, the company took merger and acquisition integration, project construction and technological innovation as the three driving wheels to promote development, which injected strong impetus into the company's subsequent development. In terms of M&A integration, the company completed the acquisition of the equity of Sinochem Crop and Agricultural Research Company, which improved the integration level of R&D, production and marketing, and further enhanced the company's influence and competitiveness. The acquisition of Baoye Chemical by its subsidiary Youjia Plant Protection has expanded the development space and will play an important role in carrying more follow-up projects. In terms of project construction, the company completed the third-phase administrative examination and approval of Youjia, which laid a solid foundation for accelerating transformation and upgrading. In terms of technological innovation, a number of new product research and development and technical improvement have been carried out, and remarkable results have been achieved in reducing the discharge of three wastes, improving quality and reducing consumption, and increasing production and efficiency.

(2) the stage of the industry

Basic situation of pesticide industry

According to the Development Plan of Pesticide Industry (20 16-2020), after years of development, China's pesticide industry has now formed a relatively complete industrial system, including scientific research and development, raw material production and preparation processing, as well as supporting raw materials and intermediates. By the end of 20 14, there were nearly 2,000 enterprises with pesticide production qualification, including more than 500 original drug production enterprises. At present, the layout of pesticide industry is more concentrated, the scale of enterprises is expanding, the product structure is more reasonable, the export structure of pesticides is improved, and technological innovation has achieved certain results. However, the pesticide industry also has some problems, such as small scale, weak competitiveness, weak independent innovation ability, low level of technology and equipment, and the product structure needs further adjustment.

Adjustment and development stage after 20 16

On the one hand, the state optimizes the industrial structure, comprehensively implements de-capacity, and eliminates the backward production capacity of the pesticide industry; On the other hand, affected by the tightening of national environmental protection policies, the whole industry has entered the adjustment stage.

Development trend of pesticide industry

1. Pesticide management will become stricter and stricter. Pesticides are toxic substances, which are related to the quality and safety of agricultural products and environmental safety, and the public is highly concerned. The management policy will be more and more perfect, the requirements for the industry will be higher and higher, the supervision and law enforcement will be more and more standardized, and the punishment for violations will be more and more severe.

2. The threshold for registration is getting higher and higher. Pesticide production enterprises are many, small and scattered, with overcapacity and too many products; Product homogeneity is serious, and there are many old products. Start the re-evaluation system and re-evaluate the products that have been registered for many years according to the new standards: eliminate highly toxic and high-risk pesticides; Constantly improve and modify the residue limit standard; Establish and improve the pesticide risk assessment and management system.

3. Environmental protection and safety have changed from slogans to real swords and guns. Relevant laws and regulations are more stringent, and supervision and inspection are more frequent. Many enterprises will change production and relocate, and some will face life and death. In the future, environmental storms will get tighter and tighter. It is normal for enterprises with backward production and substandard environmental pollution emissions to shut down.

4. It will be normal to reduce the use of links and improve efficiency. Safe and scientific use of pesticides, pesticide users are ordinary farmers, it is difficult to accurately master the application technology, blind medication and excessive use occur from time to time; Disposal of pesticide packaging waste; Implement the action plan of pesticide reduction, promote the rule of unified prevention and control, implement green prevention and control, promote efficient pesticide application machinery, high-efficiency and low-risk pesticides, and encourage pesticide socialization service organizations and professionals to provide technical services for pesticide users.

Agricultural production needs new products and technologies. With the decrease and aging of rural labor force and the development of large-scale and intensive agricultural production, agricultural production needs time-saving, labor-saving, efficient and safe new products and technologies.

6. Pesticide products will continue to go global. China is a big producer of pesticides in the world, and its export ratio exceeds 70%. The Belt and Road Initiative and South-South cooperation have brought opportunities for pesticides to go global. More pesticide enterprises in China have independently registered in other countries under their own brands, set up factories or offices overseas and applied for foreign patents. China pesticides are changing from exporting raw materials and OEM for multinational companies to exporting products, brands and technologies.

Pesticides are irreplaceable to effectively control pests and diseases. Pesticide enterprises should face up to the challenges faced by the pesticide industry, seize the opportunity, size up the situation, position accurately, seek development, change production methods, eliminate backward production capacity, and take the road of clean production, green and high-quality development. Accelerate the upgrading of products and eliminate high-toxic and high-risk pesticides.

There is still room in the international market.

The pesticide industry needs an upstream and downstream coordination system. In a sense, it is an industry with a certain moat. It is not easy to enter from the outside, and it is difficult for weak countries and even some big countries to establish a system. In addition, China is the chairman of the Pesticide Residues Committee of the Codex Alimentarius Commission, participates in the exchanges of international organizations such as FAO/ WHO and OECD, and has a certain voice in international rules. Therefore, it can use the multilateral stage to expand the cooperation channels and space for countries in the target market of pesticide export in China.

Merger and reorganization of pesticide enterprises is the general trend

Pesticide enterprises are small, scattered and chaotic, and their innovation ability is weak, which is neither suitable for market rules nor the intention of management. The 18th National Congress of the Communist Party of China proposed that we should give full play to the decisive role of the market in resource allocation and give better play to the role of the government. Now the invisible hand of the market has been quietly playing a role. The tangible hand of the government has also played a role in increasing the number of new enterprises entering industrial parks, raising the threshold, increasing environmental protection facilities and various industrial policies. It is the general trend to become bigger and stronger through merger and reorganization.

(3) Market size of the industry

The development of pesticides in China started late. Since 1990s, China government has continuously increased its investment in pesticide industry to improve the self-sufficiency rate of pesticides. After years of development, the output and market sales of pesticides in China are increasing year by year. At present, China is the largest producer of pesticides in the world. Due to the influence of environmental protection production costs and other factors, pesticide production bases in developed countries have been transferred abroad, while pesticide enterprises in China have strong comprehensive advantages in labor costs and raw material support, and become the main capacity transfer undertakers.

The Report on Development Mode Analysis and Investment Value Prediction of Chemical Pesticide Industry in China from 2020 to 2026 released by Zhiyan Consulting shows that the national chemical pesticide output has shown a downward trend since 20 17. In 20 17, the output of chemical pesticides was 294 10000 tons, and decreased to 2083000 tons in 20 18. In 20 19, the output of chemical pesticides stopped falling and rebounded, reaching 2,253,900 tons, up 1.4% year-on-year.

Pesticides play a vital role in improving production efficiency and ensuring agricultural product output in agricultural production, and are deeply loved by farmers and agricultural planting enterprises. From 20 10 to 20 17, the sales revenue of China pesticide industry maintained an overall upward trend. However, in 20 15, affected by the national policy, it entered the stage of adjustment and development, and affected by the zero growth policy of pesticide use, the growth rate of industry sales revenue dropped significantly. In 20 18, thanks to the development of bio-pesticides, the increase of product prices and the expansion of demand for pesticides for cash crops such as cotton and infrastructure, the industry's sales income was about 329 billion yuan. But overall, the growth rate of sales revenue of pesticide industry in China showed a significant downward trend. It is estimated that in 2020, the sales revenue of China's agricultural industry will be around 330 billion yuan.

(D) Industry competition pattern

China's pesticide industry started late, and generally experienced three stages of development: organochlorine pesticides from the early days of the People's Republic of China to the 1980s, organophosphorus pesticides from the 1980s to the early 20th century, heterocyclic pesticides and biological pesticides from the 20th century to the 20th century. After years of development, China has formed a relatively complete pesticide industry system, including scientific research and development, raw material production, preparation processing, raw materials and intermediates matching. From the perspective of revenue scale, China's pesticide industry enterprises are mainly small and medium-sized enterprises, and the number of enterprises above designated size is small.

The company takes revitalizing the national pyrethroid industry as its own responsibility, insists on independent innovation, implements famous brand strategy, and actively promotes the upgrading of pesticide industry structure in China. Now it has formed a diversified product pattern with pyrethroids as the core, pesticides as the leading factor and fine chemicals as the supplement. At present, the company has become a global pyrethroid production enterprise with core advantages, and the number of pyrethroid products ranks among the top in the world. At present, the market share of the company's healthy pyrethroids in China is about 70%, and dicamba's production capacity is in the leading position in the world. Youjia company was rated as the first batch of green factories in China by the Ministry of Industry and Information Technology.

According to the data ranking of China Pesticide Industry Association, our company ranked 5th among the top 100 national pesticide sales enterprises in 20 19 and 3rd in national pesticide export in 20 19. It has been selected as one of the top 20 global agrochemical enterprises for five consecutive years. During the reporting period, the company won the top 100 fine chemical enterprises in China, the best supplier of AGROW, and the excellent supplier of raw materials and intermediates in the pesticide industry in China.

In 20 19, the company deepened the cooperation with large customers, strengthened the policy propaganda after the adjustment of the new pesticide policy, guided small and medium-sized customers to standardize drug use, and expanded the sales of external environmental preparations and chlorfenapyr. Domestic sales of health care drugs maintained steady progress throughout the year, with a year-on-year increase of 9.5%. The company gives full play to the advantages of strong supply guarantee ability, fully meets the needs of domestic high-quality customers and potential customers, and increases the sales of pesticide products; Actively expand the new pyraclostrobin market and create new growth points; Continue to deepen the comprehensive cooperation with Sinochem Crops, and promote the substantial growth of preparation sales. Domestic pesticide sales increased by 6% year on year; The company continues to deepen its strategic cooperation with agrochemical multinational companies and actively promotes new cooperation in new projects and new products. At the same time, actively do a good job in product registration to lay a good foundation for business development. However, due to the sharp drop in demand for products in dicamba, the annual overseas sales decreased by 5.03% year-on-year.

In 20 19, the company ranked among the top 10 in national pesticide export and sales (the third in export and the fifth in sales), and was selected as one of the top 20 global agrochemical enterprises for five consecutive years. It was rated as the top 100 fine chemical enterprises in China, the best supplier of AGROW, and the excellent supplier of raw materials and intermediates in pesticide industry in China.

(5) the moat

This company is the largest enterprise in bionic pesticide industry in China. The output and business income of pyrethroid pesticides have been ranked first in the similar pesticide industry in China, and they were rated as "Top 100 Pesticide Enterprises in China" and 10 pesticide export enterprises in China by China Pesticide Industry Association. The project "Development and Application of Green and Efficient Pyrethroids" won the China Industry Award, and its subsidiary Youjia Company was rated as the first batch of "green factories" in China by the Ministry of Industry and Information Technology.

1. Advantages of independent research and development

Companies adhere to research and development as the guide, and adhere to the technical innovation strategy of combining imitation and innovation. We have successively conquered many key technologies of pyrethroids, and independently developed 72 new products, including 4 new varieties, 1 1, and 20 high-tech products in Jiangsu province. He has won 22 scientific and technological awards at or above the provincial level, such as China Industry Award, Jiangsu Science and Technology Progress Award and China Petroleum and Chemical Industry Federation Science and Technology Progress Award. Undertaking 2 1 items of national science and technology support plan, 863 plan and transformation of scientific and technological achievements in Jiangsu province, leading or participating in the formulation of 6 national standards and 9 industry standards. By the end of the reporting period, the company has obtained more than 400 patents.

The Agricultural Research Corporation has established the only national key laboratory for the creation and development of new pesticides and the national engineering research center for pesticides, and developed a number of new pesticide varieties, such as flumorph, tetrachloropyridaben and chlorfenapyr, which have become the leading products in the domestic market. The new fungicide flumorph created by it is the first pesticide product with independent intellectual property rights in China.

2. Brand advantage

The company's products widely adopt international advanced standards, and the product quality is generally well received by customers. The company's "Moju" brand pyrethroid pesticide has been awarded the title of "Jiangsu Famous Brand Product" for many years in a row and won the title of "the most competitive brand in the market" by the Ministry of Commerce. "Moju" and "Youshi" trademarks are well-known trademarks in China. Baozhuo was awarded the title of "20 19 Excellent Acaricide for Citrus"; "Tengshou" became the leading brand of wheat seed treatment agent market and won the "20 19 Plant Health Product Contribution Award"; 9080 (tetrachloroacetamide) was listed in the Recommended Catalogue of Emergency Prevention and Control Drugs for Spodoptera exigua by the Ministry of Agriculture and Rural Affairs.

(VI) Enterprise leadership team

(vii) Corporate culture

(8) Challenges, opportunities and risks

In 2020, from the perspective of domestic economy, the fundamentals of China's economic stability and long-term improvement have not changed. At the same time, because China is still in a critical period of changing the development mode, optimizing the economic structure and transforming the growth momentum, the influence of "three-phase superposition" continues to deepen and the downward pressure on the economy is further increased. From the perspective of the global economy, the international economic growth is weak, and the sources of turmoil and risk points have increased significantly. In addition, affected by the spread of COVID-19 epidemic, from the market forecast, 2020 will be the most severe, stressful and difficult year for the company in recent years. Considering the internal and external environment, the company mainly faces the following challenges and opportunities.

Challenges faced:

1. Four external challenges. First, the challenge of insufficient external demand, insufficient demand in the agrochemical market, and the export of pesticides is facing greater challenges; Second, the challenge of downward price, the price of the company's main profitable varieties fell, which had a great impact on performance; Third, the challenge of capacity release, the market operating rate of some mainstream products gradually recovered, which will further intensify market competition; Fourth, the challenge of project approval. 3.2 1 After the Xiangshui explosion accident, Jiangsu Province concentrated on the investigation and rectification of hazardous chemicals and issued a safety and environmental protection rectification plan. Under the new situation, it is more difficult for Jiangsu agrochemical enterprises to apply for approval.

2. Four internal pressures. First, dicamba, a large-tonnage variety, continues to be in a downturn and will remain in a downturn in 2020; Second, some of the company's main profitable varieties are included in the list of 25% tariff imposed by the United States, which will have a substantial impact on product exports; Third, 2020 is the key stage of management integration and team integration after the acquisition of assets of "Xinyangnong", facing the pressure of comprehensive integration and collaborative value contribution.

Advantageous opportunities:

From a macro perspective, there are four main advantages: first, the state will continue to implement a proactive fiscal policy and a prudent monetary policy to further reduce the financing costs of enterprises; Second, the state will continue to implement the tax reduction and fee reduction policy to further reduce the cost of electricity, gas and logistics for enterprises; Third, the state will continue to take innovation as the driving force, support the development of the real economy, and strive to build a number of advanced manufacturing clusters with international competitiveness, and technology-driven enterprises with a certain scale will receive more policy support; Fourth, the country will continue to fight the tough battle of pollution prevention and control, with the same direction and intensity, and enterprises with green development capabilities will win a bigger market.

From the enterprise's own point of view, there are three main advantages: first, compared with the past, Xinyang Agricultural Research has a more complete production and marketing integration system, which is conducive to winning more voice in the new round of competition; Second, Xinyangnong has become an important member of Sinochem's agricultural sector, which is conducive to winning more development opportunities relying on the new platform; Third, the third phase of Youjia was successfully approved, which provided a guarantee for the company to fully complete the withdrawal from the city and enter the park. Follow-up projects will inject new impetus into the company's future development and open up new space.

Possible risks

1. Epidemic risk. At present, the epidemic in COVID-19 is spreading to the whole world. Although the domestic epidemic situation has been controlled and enterprises have started to resume work, the overseas epidemic situation is still unpredictable, which may adversely affect the supply of raw materials, product demand and cargo transportation.

2. The risk of abnormal climate. In recent years, severe weather has occurred frequently all over the world, which has adversely affected crop growth and pesticide demand. The company will continue to develop new pesticide varieties, form full coverage of pesticides, herbicides and fungicides, and strive to smooth the impact of bad weather in individual areas.

3. Exchange rate risk. The foreign exchange market fluctuates violently, and there is great uncertainty about the RMB exchange rate. At present, the total export business of the company is large, and the settlement of foreign exchange faces certain uncertainty. The company will strengthen the research on international trade and exchange rate policies, rationally formulate trade terms and settlement methods, avoid exchange rate risks in international settlement to the maximum extent, and at the same time strengthen the research on the law of foreign exchange fluctuations, timely carry out foreign exchange forward settlement business, and lock in exchange rate fluctuations.

4. Market risk. On the one hand, the international trade friction continues, and the company's product prices and sales are facing the risk of market fluctuations. On the other hand, the proportion of exports is too large, and there is a risk of high proportion and great dependence on foreign markets. On the one hand, the company will increase the development of the domestic market and strive to maintain the balance between domestic and foreign sales; on the other hand, it will continue to explore international emerging markets and strive to promote the regional balance of global trade.

5. Safety and environmental risks. Most of the raw materials used in the company's production are flammable, explosive, corrosive or toxic substances. The production process of products involves high temperature and high pressure, which requires high operation, and there is a risk of accidents caused by imperfect equipment or technology and improper operation. The company will further implement the main responsibility of safety and environmental protection, strengthen process management, increase capital investment, adhere to source management, pursue intrinsic safety, continue to carry out cleaner production transformation, and strive to control safety and environmental protection risks within a reasonable range.

Second, the financial report analysis

(1) Look at the total assets and judge the company's strength and expansion ability.

Before 20 18, it is rapid expansion, and before 20 19, it is necessary to observe.

(2) Look at the asset-liability ratio and understand the company's debt risk.

The asset-liability ratio is above 40%, and the debt risk below 60% is small.

(c) Study interest-bearing liabilities and quasi-monetary funds to eliminate debt risks.

The difference between quasi-monetary funds and interest-bearing liabilities is greater than 0, and there is no debt repayment pressure.

(d) Look at the difference between "prepayments" and "accounts receivable" to understand the company's competitive advantage.

The difference between accounts payable in advance and accounts receivable in advance is greater than 0, so the company has strong competitiveness and the ability to "eat at both ends".

(5) Look at accounts receivable and contract assets to understand the company's product competitiveness.

(Accounts receivable+contract assets) accounts for more than 10% of the total assets, so we need to look at accounts receivable.

The aging is basically within 1 year, which is not a big problem.

The provision rules for bad debts are still relatively strict.

(VI) Check the fixed assets to understand the cost of maintaining the competitiveness of the company.

Fixed assets account for less than 40% of total assets and belong to light asset company. The cost of maintaining sustainable competitiveness is relatively low.

(7) Look at the investment assets and judge the concentration of the company.

In the last two years, the proportion of investment assets to total assets is less than 10%, and it is an excellent company focusing on its main business.

(eight) check the inventory, understand the risk of future performance of the company.

Total accounts receivable/assets > 5% and total inventory/recent assets 1 year >: 15% We need to look at inventory depreciation reserves.

The company has made this preparation for the main inventory, and there is little risk of thunderstorm.

(9) Look at the goodwill and understand the risk of the company's future performance.

Without goodwill, there is no risk in this project.

(10) Look at the operating income and understand the industry status and growth of the company.

The growth of operating income is unstable.

(eleven) look at the gross profit margin and understand the competitiveness and risks of the company's products.

Gross profit margin is less than 40%, which is caused by industry characteristics.

(12) Look at the period expense rate to understand the company's cost control ability.

More than 40%, the cost control ability still needs to be improved.

(13) Look at the sales expense ratio to understand the sales difficulty of the company's products.

The sales expense ratio is less than 15%, and its products are easy to sell and the sales risk is relatively small.

(14) Look at the main profit and understand the profitability and profit quality of the company's main business.

The profit rate of the main business is basically greater than 15%, and the profitability of the main business is strong; The ratio of main profit to operating profit is above 80% in most cases, and the profit quality is high.

(fifteen) look at the net profit, understand the company's operating results and gold content. Net profit mainly depends on the gold content of net profit.

In recent three years, the cash content of net profit is more than 100%, and 15 and 16 are relatively low.

(16) Look at the net profit returned to the mother and understand the overall profitability and sustainable development ability of the company.

The return on net assets is increasing, exceeding 15% in recent two years, and it is a relatively good company. In recent three years, the growth rate of net profit attributable to the owners of the parent company is greater than 10%, indicating that the company is growing rapidly.

(XVII) Check the cash paid for the purchase of fixed assets, intangible assets and other long-term assets to understand the growth potential of the company.

The cash paid for construction accounts for 3%-60% of the net cash flow generated by operating activities, so the company has great growth potential and relatively small risks.

(XVIII) Look at the cash paid for distributing dividends, profits or paying interest, and understand the cash dividends of the company.

The cash paid by distributing dividends, profits or paying interest accounts for 20% to 70% of the net cash flow generated by operating activities, and the long-term sustainability of dividends is strong.

Third, valuation.

The company has 1 moat. In the past five years, the cash content of net profit was less than 100% in two years, the asset-liability ratio exceeded 40% in the past three years, the historical average price-earnings ratio was 25.5 1 times, and the reasonable price-earnings ratio was 20 times.

The average annual growth rate of net profit in recent five years is 20.79%, which is a conservative estimate. The growth rate in the next three years will be 15%, and the estimated net profit in 2020 will be about165438+500 million.

The total share capital is 3,654,380,000 shares.

The net profit after three years is:165438+500 million *1.15 *1.1.05 =1.749 million.

The reasonable market value after 3 years is: 65.438+74.9 million * 20 = 34.98 billion.

After 3 years, the reasonable stock price is: 34.98 billion /3 1 100 million shares = 1 12.84 yuan/share.

Good price: 1 12.84 yuan per share 2=56.42 yuan per share.

The current price is 152 yuan/share, which is obviously overvalued.

Four. Changes in the top ten tradable shareholders and senior executives