研究报告 Research Report 8 Apr 2025 中国心连心化肥 China XLX Fertiliser (1866 HK) 母公司拥有人应占溢利同比增长 22.96%，产能扩张提升市场份额 NPAtS up 22.96% YOY in 2024, Capacity Expansion Boosts Market Share [Table_yemei 观点聚焦 1] Investment Focus [Table_Info] 维持优于大市 Maintain OUTPERFORM 评级 优于大市 OUTPERFORM 现价 HK$3.99 目标价 HK$5.18 HTI ESG 4.0-4.3-5.0 E-S-G: 0-5, (Please refer to the Appendix for ESG comments) 市值 HK$5.12bn / US$0.66bn 日交易额 (3 个月均值) US$1.28mn 发行股票数目 1,283mn 自由流通股 (%) 47% 1 年股价最高最低值 HK$4.74-HK$3.41 注：现价 HK$3.99 为 2025 年 04 月 08 日收盘价 ...

Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 6.5, indicating a potential upside of 54% from the current price of HKD 4.2 [6][4]. Core Insights - The company achieved a revenue of RMB 23.13 billion in 2024, a slight decrease of 1% year-on-year, while the net profit attributable to shareholders increased by 23% to RMB 1.46 billion [2][4]. - The company has announced a dividend policy for 2025-2027, committing to a distribution rate of no less than 25% of audited net profit and a minimum dividend of RMB 0.24 per share [2][4]. - The report anticipates net profits for 2025-2027 to reach RMB 1.1 billion, RMB 1.88 billion, and RMB 2.82 billion, reflecting year-on-year changes of -25%, +71%, and +50% respectively [4][6]. Revenue and Profit Analysis - Urea revenue was RMB 7.31 billion, up 6% year-on-year, but prices fell by 17% due to increased industry capacity and export restrictions, leading to a 4 percentage point decline in gross margin to 25% [3]. - Compound fertilizer revenue decreased by 2% to RMB 6 billion, with a gross margin increase of 2.1 percentage points to 15% [3]. - Methanol revenue rose by 15% to RMB 2.68 billion, with a gross margin increase of 9.2 percentage points to 8.6% [3]. - The company is facing an oversupply issue in the urea market, with an expected addition of 6.6 million tons of capacity in 2025 [3]. Capacity Expansion - The company is expanding its production capacity, with several projects coming online, including a 60,000-ton formaldehyde project and a 300,000-ton compound fertilizer project [4]. - By the end of 2027, the company's fertilizer production capacity is expected to exceed 13 million tons, making it the largest fertilizer producer in China [4].

港股上市公司中国心连心化肥（01866.HK）3月28日晚间公告，公司2024年全年取得收入231.28亿元（人民币，单位下同），同比下降约1%； 归母净利润为14.59亿元，同比增长23%；拟派发末期股息每股26分。中国心连心始终坚持"以肥为基、肥化并举"的发展战略，做强做大化肥主 业，依托河南、新疆、江西等地区资源，推进多基地布局、转型升级和延链发展，致力于成为中国最受尊重的化肥企业集团。 拓展营销渠道、延伸供应链 主营产品销量稳步增长 年报显示，心连心化肥2024年度销售收入同比下降1%，主要是受煤化工行业相关产品价格下滑影响，但随着新增优质产能的释放及规模优势 的增强，能在一定程度上抵御价格波动及市场疲软对经营业绩的挤压。同时，公司将通过拓展营销渠道，延伸供应链，有效带动尿素、甲醇、 DMF等产品销量提升。 报告期内，集团尿素产品2024年销售收入73.06亿元，同比增长6.3%，主要得益于尿素销量同比增长29%，规模产能的扩大使得尿素的产能同 比增加21%，但2024年新增产能集中释放叠加出口受限，导致市场供需矛盾突出，影响了集团尿素售价同比下降17%。复合肥销售收入59.94亿 元，同比下降2%， ...

Financial Performance - The total revenue for the fiscal year ending December 31, 2024, was RMB 23,128,292, a decrease of 1.5% compared to RMB 23,475,338 in the previous fiscal year[3] - Gross profit for the same period was RMB 3,931,083, down 6.1% from RMB 4,187,020 in the previous year[3] - Net profit for the year was RMB 2,013,620, representing an increase of 23% from RMB 1,637,294 in the previous year[3] - Basic earnings per share increased to RMB 120.05, up from RMB 96.95, reflecting a growth of 23.8%[3] - The company reported an increase in other income and gains to RMB 1,061,152, significantly up from RMB 298,931 in the previous year[3] - The company reported a pre-tax profit of RMB 2,376,436,000 and a net profit of RMB 2,013,620,000 for the year[15] - The company’s net profit attributable to shareholders increased by 23% year-on-year to RMB 1,459,000,000 in 2024, driven by significant investment income from the sale of its subsidiary[36] - Net profit rose by approximately RMB 377 million or about 23% from RMB 1,637 million in FY2023 to RMB 2,014 million in FY2024[52] Assets and Liabilities - Non-current assets totaled RMB 26,217,520, an increase of 11.3% from RMB 23,550,108 in the previous year[4] - Total assets reached RMB 32,518,244, up 11.5% from RMB 29,133,496 in the previous year[4] - Total liabilities increased to RMB 19,996,456, a rise of 7.4% from RMB 18,622,498 in the previous year[6] - The company’s bank loans and other borrowings totaled RMB 12,855,312,000 in 2024, compared to RMB 11,633,132,000 in 2023[33] - Approximately 40.97% of the group's debt, amounting to RMB 5,267 million, is due within one year as of December 31, 2024[63] - The debt-to-equity ratio improved from 70.59% in FY2023 to 69.66% in FY2024, with a net debt of RMB 18,042 million[54] Revenue Breakdown - Total revenue for the year ended December 31, 2024, was RMB 23,128,292,000, with external customer sales contributing RMB 23,128,292,000[15] - The segment profit for the automotive urea division was RMB 1,803,927,000, while the pharmaceutical segment contributed RMB 895,955,000[15] - The sales revenue from finished urea increased by approximately RMB 432,000,000 or 6.3% to about RMB 7,306,000,000 in 2024, supported by a 29% increase in sales volume[37] - The sales revenue of compound fertilizer was approximately RMB 5,994,000,000, a decrease of about RMB 136,000,000 or 2% compared to the fiscal year 2023[38] - Methanol sales revenue rose by approximately RMB 339,000,000 or 14.5% to about RMB 2,678,000,000 in fiscal year 2024, with a 16% increase in sales volume attributed to recovering domestic manufacturing demand[40] - The sales revenue of automotive urea solution decreased by approximately RMB 57,000,000 or 13% to about RMB 377,000,000 in fiscal year 2024, with a 10.3% decline in average selling price[41] - The sales revenue of melamine decreased by approximately RMB 44,000,000 or 5.6% to about RMB 740,000,000 in fiscal year 2024, with a 11.3% decline in average selling price[42] - DMF sales revenue increased by approximately RMB 145,000,000 or 14% to about RMB 1,192,000,000 in fiscal year 2024, driven by a 36% increase in sales volume[43] Expenses and Costs - The cost of goods sold for inventory was RMB 19,197,209 in 2024, slightly down from RMB 19,288,318 in 2023[18] - Depreciation of property, plant, and equipment increased to RMB 1,605,043 in 2024 from RMB 1,492,772 in 2023, reflecting higher capital expenditures[18] - Selling and distribution expenses increased by approximately RMB 90,000,000 or 15% to about RMB 708,000,000 in fiscal year 2024, driven by incentives for sales personnel and increased marketing activities[48] - Financial costs decreased by approximately RMB 85 million or about 15% from RMB 580 million in FY2023 to RMB 495 million in FY2024, primarily due to refinancing high-cost loans and strategic bank partnerships[50] - Income tax expenses increased by approximately RMB 61 million or about 20% from RMB 302 million in FY2023 to RMB 363 million in FY2024[51] Future Plans and Strategies - The company plans to continue expanding its product offerings, focusing on differentiated products such as urea and methanol[8] - The company expects to implement the new accounting standards starting from January 1, 2027, with early application permitted[13] - The group aims to expand production capacity, targeting a total output exceeding 10 million tons, while introducing advanced industry technologies[57] - The group is focusing on differentiated products and enhancing R&D efforts to meet increasing market demand for high-efficiency fertilizers[56] Shareholder Returns - The company plans to distribute a final dividend of RMB 0.26 per share for the year ending December 31, 2024, up from RMB 0.24 in 2023[21] - The company proposed a dividend policy for the years 2025 to 2027, with a payout ratio of no less than 25% of audited net profit attributable to shareholders and a minimum dividend of RMB 0.24 per share[24] - The company repurchased a total of 6,312,000 shares at a total cost of HKD 24,609,000, representing approximately 0.5% of the issued shares as of December 31, 2024[71] Employee and Operational Metrics - The group employed 11,787 employees as of December 31, 2024, an increase from 10,390 employees in 2023, indicating growth in workforce[74]

Investment Rating - The report maintains a "Buy" rating for China Heart and Heart Fertilizer with a target price of HKD 6.5, indicating a potential upside of 55% from the current price of HKD 4.2 [4][3]. Core Insights - The company reported a revenue of RMB 17.42 billion for the first three quarters, a slight decrease of 0.6% year-on-year, while net profit attributable to shareholders increased by 80.7% year-on-year to RMB 1.53 billion, aligning with expectations [2][3]. - The strong profit growth is attributed to a decrease in raw material prices and stable production operations, leading to a 5% increase in gross profit [2]. - The company sold 100% equity in Tianxin Coal Industry, generating an investment income of RMB 790 million, with a total of RMB 800 million received by the end of the third quarter [2]. Revenue Breakdown - Urea revenue accounted for RMB 5.62 billion, representing 32% of total revenue, with a sales volume of 2.768 million tons, up 33% year-on-year, despite a 14% decline in average selling price to RMB 2029 per ton [3]. - Compound fertilizer revenue was RMB 4.65 billion, making up 27% of total revenue, with stable sales volume and a gross margin increase of 5 percentage points due to higher sales of efficient fertilizers [3]. - Methanol revenue reached RMB 1.89 billion, contributing 11% to total revenue, with a 2% increase in average selling price and a 17% rise in sales volume [3]. - The report anticipates a seasonal fluctuation in demand for compound fertilizers and a gradual stabilization of fertilizer prices due to supply constraints and recovering demand [3]. Financial Performance - The company achieved a gross margin of 30% for urea, 17% for compound fertilizers, and 8% for methanol, with notable improvements in profitability across various segments [3]. - The report projects a revenue growth rate of 4.1% for FY2024, with net profit expected to increase significantly by 73.4% [5][7].

Summary of Conference Call Records Company and Industry Overview - The company operates in the chemical industry, specifically focusing on fertilizer production, utilizing a circular economy approach to optimize its supply chain and reduce environmental pollution [1][2][3] - The company aims to become the most respected fertilizer enterprise in China, with major production bases located in Henan, Xinjiang, and Jiangxi [1][3] Key Points and Arguments Production Capacity and Strategy - Current total production capacity includes 3.9 million tons of urea and 4.15 million tons of compound fertilizer [1] - Future strategic planning includes expanding production bases in Guangxi and Xinjiang, aiming for a nationwide layout of large and small bases [1][3] - The company has achieved industry-leading scale and profitability, being one of the few domestic companies producing both urea and compound fertilizers at a large scale [1][3] Financial Performance - For the first three quarters of 2024, the company reported sales revenue of approximately RMB 17.42 billion, with net profit of about RMB 2.031 billion, a 75% year-on-year increase [4] - Urea sales volume reached 2.7684 million tons, a 33% increase year-on-year, with revenue from urea at approximately RMB 5.618 billion, a 15% increase [4][5] - The compound fertilizer segment saw a profit increase of 77%, with overall sales volume remaining stable at 1.7342 million tons [5] Market Dynamics and Pricing - Raw material prices have been declining, impacting product prices; however, the company has managed to maintain stable sales through increased production capacity and marketing efforts [4][5] - The company anticipates that the market for fertilizers will improve in 2024, driven by rising agricultural product prices and supportive government policies [10][11] Environmental and Technological Initiatives - The company emphasizes environmental protection and resource utilization, adhering to a green development philosophy [2][3] - Significant investments in technology and innovation have been made, including the establishment of a three-tier ESG governance structure [2] Competitive Advantages - The company has a low-cost and differentiated competitive advantage, supported by over 50 years of production management experience [3][7] - It is recognized as a benchmark enterprise for energy efficiency in the industry, with a 10% cost advantage over similar companies [7] Future Outlook - The company plans to enhance its product structure and expand its market share by focusing on high-consumption products and improving brand competitiveness [3][6] - The goal is to increase the proportion of high-efficiency fertilizers in total sales to 80% by 2027 [26] Additional Important Information - The company has established a unique marketing service system to provide comprehensive support to farmers, enhancing the adoption of high-efficiency fertilizers [9][26] - The company is actively pursuing international expansion while maintaining its focus on the fertilizer business [7][32] - Capital expenditures are projected to remain stable, with a focus on completing ongoing projects and potentially increasing dividends post-2024 [31][32] This summary encapsulates the key insights from the conference call, highlighting the company's strategic direction, financial performance, market dynamics, and future outlook in the chemical and fertilizer industry.

Investment Rating - The report maintains an "Outperform" rating for China XLX Fertiliser [1][7][19] Core Views - In the first three quarters of 2024, the company achieved a net profit attributable to shareholders of RMB 1.534 billion, representing an 80.7% year-on-year increase, while operating income was RMB 17.420 billion, down 0.6% year-on-year [1][4] - The growth in performance is attributed to a decline in costs leading to a 5% year-on-year increase in gross profit, alongside a stable production line that effectively reduced overall energy consumption, resulting in a gross margin increase to 19% [1][4] - The company has also seen significant sales increases in major products, with urea sales volume up 33% year-on-year and methanol sales volume up 17% year-on-year [5][6] Financial Performance Summary - For the first three quarters of 2024, the average price of urea was RMB 2,029 per tonne, down 14% year-on-year, with sales volume reaching 2.768 million tonnes [5] - The average price of compound fertiliser remained flat at RMB 2,679 per tonne, with sales volume stable at 1.734 million tonnes, while gross margin increased by 5% year-on-year to 17% [5] - The company expects EPS for 2024, 2025, and 2026 to be RMB 1.18, 1.28, and 1.42 respectively, with a target price of HKD 5.16 based on a PE of 4.02 for 2024 [7][19] Project Development - Ongoing projects include the Xinjiang paraformaldehyde project, expected to complete by the end of 2024, and the Jiangxi Jiujiang industry chain extension project, anticipated to commence operations in Q3 2025 [6][7] - The Zhundong project and Guangxi Base Big Project are also progressing as planned, with expected completion dates in 2025 and 2026 respectively [6][7]

Financial Performance - For the nine months ended September 30, 2024, the company's operating revenue was RMB 17,419,724 thousand, a decrease of 0.6% compared to the same period last year[1]. - Net profit for the same period increased significantly by 75.8% to RMB 2,031,307 thousand, with net profit attributable to shareholders of the parent company rising by 80.7% to RMB 1,534,087 thousand[1]. - Basic earnings per share rose by 85.3% to RMB 1.26, while the weighted average return on equity decreased by 2 percentage points to 17.65%[1]. Cost and Margin Analysis - The company achieved a gross profit growth of 5% due to reduced raw material prices and stable production operations, while management and financial expenses decreased by 2% and 13% respectively[2]. - Urea gross margin remained stable at 30% compared to the same period last year[7]. - Compound fertilizer gross margin increased by 5 percentage points to 17%, driven by an 11% increase in sales of high-efficiency compound fertilizers, particularly in Xinjiang[7]. - Methanol gross margin rose by 8 percentage points to 8% due to ongoing technological innovations that reduced costs by 6%[7]. - Melamine gross margin decreased by 4 percentage points to 30% due to a decline in selling prices[7]. - The pharmaceutical intermediates segment saw a 13 percentage point drop in gross margin to -3%, attributed to increased costs from immature technology in Xinjiang[7]. Asset and Equity Position - Total assets increased by 5.6% to RMB 30,780,414 thousand, and equity attributable to owners rose by 19.0% to RMB 12,501,326 thousand[2]. - The asset-liability ratio improved to 59.4%, a decrease of 4.5 percentage points from the previous year[2]. - The company received RMB 800 million from the sale of its 100% stake in Tianxin Coal Industry, which effectively reduced its asset-liability ratio[3]. Sales and Production Capacity - Urea sales volume increased by 33% to 2,768,000 tons, driven by expanded production capacity and recovery of production facilities[6]. - The average price of urea decreased by 14% to RMB 2,029 per ton due to falling raw material prices and market supply-demand factors[5]. - The pharmaceutical intermediate segment saw an 18% increase in average price to RMB 45,106 per ton, supported by an increase in sales of higher-priced products[5]. Project Developments - The Xinjiang project is expected to complete construction by the end of the year, with a production capacity of 60,000 tons of formaldehyde[8]. - The Jiangxi project is on track for completion in Q3 2025, with a total capacity of 600,000 tons of synthetic ammonia and 1.2 million tons of controlled-release fertilizer[8]. - The Guangxi base project is progressing as planned, with a capacity of 1.2 million tons of synthetic ammonia and 1 million tons of high-efficiency compound fertilizers[9]. Market Outlook - The company anticipates stable fertilizer prices due to seasonal demand and supply constraints in the winter[10]. - Long-term growth is expected as the company focuses on sustainable development and green low-carbon transformation, enhancing product differentiation and resource utilization[11].

Strategic Positioning and Development Principles - The company's strategic positioning includes adhering to the development strategy of "Fertiliser as foundation, fertiliser and chemical side by side" and the operating strategy of "low-cost and differentiation" [5] - The company aims to achieve high-efficiency, high-end, lean development in the Group as its core mission [5] - The company follows six development principles, including strategic positioning direction, customer orientation, pursuing excellence, pragmatic and highly efficient management, key capabilities enhancement, and preventing and controlling development risks [6][7] - The company is committed to becoming China's most respected fertiliser enterprise group [5] Company Overview and Governance - The company's headquarters is located in Xinxiang Economic Development Zone, Henan Province, PRC [10] - The company's stock code on the Hong Kong Stock Exchange is 1866 [10] - The company's corporate website is www.chinaxlx.com.hk [10] - The company's board includes executive directors and independent non-executive directors, with Liu Xingxu as the Chairman of the Board [8] - The company's auditor is Ernst & Young LLP, with Yong Kok Keong as the partner-in-charge [9] - The company's principal bankers include China Construction Bank, Agricultural Bank of China, Bank of China, Industrial & Commercial Bank of China, Bank of Communications, and HSBC [9] Financial Performance and Key Metrics - Total revenue increased by approximately RMB2 million or 0.02% from RMB12,059 million in 1H2023 to RMB12,061 million in 1H2024 [11] - Net profit increased by approximately RMB160 million or 21% from RMB778 million in 1H2023 to RMB938 million in 1H2024 [11] - Gross profit increased by 12% YoY due to declining raw material costs [11] - Revenue for 2024 remained stable at RMB 12,060,957 thousand, showing minimal growth compared to RMB 12,059,121 thousand in 2023 [101] - Gross profit increased to RMB 2,355,720 thousand in 2024, up from RMB 2,110,699 thousand in 2023, reflecting improved cost management [101] - Profit before tax rose to RMB 1,122,610 thousand in 2024, compared to RMB 925,758 thousand in 2023, indicating stronger operational performance [101] - Net profit attributable to owners of the parent increased to RMB 686,996 thousand in 2024 from RMB 546,194 thousand in 2023 [101] - Basic earnings per share grew to RMB 56.4 cents in 2024, up from RMB 44.8 cents in 2023 [101] - Total assets increased to RMB 31,283,035 thousand in 2024, compared to RMB 29,133,496 thousand in 2023, driven by growth in non-current assets [103] - Cash and cash equivalents significantly increased to RMB 2,014,075 thousand in 2024 from RMB 1,162,558 thousand in 2023, reflecting improved liquidity [103] - Total equity rose to RMB 11,676,254 thousand in 2024, up from RMB 10,510,998 thousand in 2023, indicating stronger financial health [105] - Non-current liabilities decreased slightly to RMB 8,131,009 thousand in 2024 from RMB 8,178,917 thousand in 2023, showing reduced long-term debt burden [105] - Retained profits grew to RMB 3,774,432 thousand in 2024, up from RMB 3,378,490 thousand in 2023, reflecting improved profitability [107] - Total equity increased to RMB 11,676,254,000 as of 30 June 2024, up from RMB 10,510,998,000 at the beginning of the year [109] - Profit for the period reached RMB 686,996,000, contributing to the overall equity growth [109] - Net cash flows generated from operating activities amounted to RMB 2,075,084,000 for the six months ended 30 June 2024 [111] - Cash and cash equivalents at the end of the year stood at RMB 2,014,075,000, a significant increase from RMB 1,162,558,000 at the beginning of the year [113] - The company received government grants totaling RMB 49,214,000 during the period [111] - Proceeds from disposal of property, plant, and equipment were RMB 814,550,000, a substantial increase from RMB 33,004,000 in the same period last year [111] - Dividends paid to non-controlling shareholders amounted to RMB 446,138,000 [111] - Loans and borrowings proceeds were RMB 4,892,178,000, slightly higher than the previous year's RMB 4,880,817,000 [111] - Repayments of loans and borrowings were RMB 4,029,744,000, a decrease from RMB 5,292,047,000 in the same period last year [111] Product Performance and Segment Analysis - Urea sales revenue increased by approximately RMB316 million or 9% from RMB3,518 million in 1H2023 to RMB3,834 million in 1H2024 [12] - Urea sales volume increased by 25% YoY, while average selling price decreased by 13% YoY [12] - Urea gross profit margin increased by 2 percentage points from 29% in 1H2023 to 31% in 1H2024 [12] - Urea production output increased by 24% YoY due to released production capacity [12] - Urea solution for vehicle sales revenue decreased by approximately RMB59 million or 26% from RMB225 million in 1H2023 to RMB166 million in 1H2024 [12] - Urea solution for vehicle gross profit margin decreased by 6 percentage points to 18% in 1H2024 [12] - Compound fertilisers revenue increased by RMB 202 million or 6% to RMB 3,410 million in 1H2024, driven by a 13% YoY increase in sales volume, partially offset by a 6% YoY decrease in average selling price [13] - Compound fertilisers gross profit margin rose by 6 percentage points to 18% in 1H2024, due to an 18% YoY decrease in potash procurement price and a 23% YoY increase in high-efficiency compound fertiliser sales [13] - Methanol revenue increased by RMB 314 million or 32% to RMB 1,291 million in 1H2024, driven by a 31% YoY increase in sales volume and a 1% YoY increase in average selling price [13] - Methanol gross profit margin improved by 10 percentage points to 8% in 1H2024, due to a 9% YoY decrease in average cost of sales [13] - Melamine revenue decreased by RMB 15 million or 4% to RMB 397 million in 1H2024, mainly due to a 6% YoY decrease in average selling price [14] - Melamine gross profit margin decreased by 6 percentage points to 30% in 1H2024, due to a 6% YoY decrease in average selling price [14] - DMF revenue increased by RMB 72 million or 14% to RMB 595 million in 1H2024, driven by a 31% YoY increase in sales volume, despite a 13% YoY decrease in average selling price [14] - DMF gross profit margin increased by 2 percentage points to 13% in 1H2024, due to a 15% YoY reduction in average cost through production technology innovation and equipment improvement [14] - Revenue from the medical intermediate segment decreased by RMB65 million (22%) YoY to RMB234 million in 1H2024, driven by a 33% YoY decline in sales volume [15] - Gross profit margin of the medical intermediate segment dropped by 17 percentage points to -1% in 1H2024 due to a 38% YoY increase in average production costs [15] - Other income, net increased by RMB22 million (24%) YoY to RMB112 million in 1H2024, primarily due to a RMB31 million rise in subsidy income [15] - The company operates in seven reportable segments: urea, urea solution for vehicles, compound fertilizer, methanol, melamine, DMF, and medical intermediates [122] - Total revenue for the six months ended 30 June 2024 was RMB 12,060,957,000, with urea contributing the largest share at RMB 3,834,000,000 [126] - Segment profit for the period was RMB 2,355,720,000, with urea generating the highest segment profit of RMB 1,181,231,000 [126] - Other products, including liquid ammonia, organic amines, humic acid, and furfuryl alcohol, contributed sales revenue of RMB 668 million, RMB 275 million, RMB 201 million, and RMB 163 million respectively [127] - Profit before tax for the period was RMB 1,122,610,000, with income tax expense of RMB 184,124,000, resulting in a net profit of RMB 938,486,000 [126] - Unallocated expenses for the period amounted to RMB 980,827,000, primarily consisting of other income, other expenses, selling and distribution expenses, general and administrative expenses, finance costs, and income tax expense [126] - Interest income for the period was RMB 13,714,000, while finance costs were RMB 265,997,000 [126] Expenses and Costs - Selling and distribution expenses rose by RMB67 million (22%) YoY to RMB378 million in 1H2024, driven by increased advertising and sales performance commissions [16] - General and administrative expenses increased by RMB62 million (9.7%) YoY to RMB702 million in 1H2024, mainly due to higher management salaries and service fees [16] - Finance costs decreased by RMB58 million (18%) YoY to RMB266 million in 1H2024, supported by lower interest rates and early repayment of high-interest borrowings [18] - Employee benefit expenses, including salaries and bonuses, rose to RMB 1,221,372 thousand in 2024 from RMB 1,076,976 thousand in 2023 [145] Market and Industry Outlook - The company expects compound fertilizers to perform better in 2H2024, with industrial demand for urea significantly increasing due to national policy requirements [24] - Domestic economic recovery is expected to improve in the second half of the year, with stable coal prices and balanced supply and demand in the fertilizer industry [27] - Urea demand is projected to increase significantly due to government-mandated urea denitrification upgrades in the power sector [27] - The company is leveraging big data and transforming its sales structure to focus on large-scale farmers, enhancing brand influence through differentiated products and precision services [27] - The company is strengthening technical upgrades and investing in advanced technologies to maximize investment returns [27] - Domestic policy adjustments have led to a significant increase in volume, impacting overall cash flow [27] Shareholder and Equity Information - Ms. Yan Yunhua holds 21.18% of the company's issued shares, with 257,166,000 shares in total [31] - Pioneer Top Holdings Limited holds 35.11% of the company's issued shares, with 426,344,999 shares [35] - Mirth Power Limited holds 17.45% of the company's issued shares, with 211,939,848 shares [35] - The Share Award Plan is valid for 10 years from 17 May 2024, with a grant price of HK$1.5 per share [61][64] - 70,790,000 awards were granted under the Share Award Plan during the reporting period, representing approximately 5.83% of the company's issued share capital [69] - The maximum number of shares subject to awards in a 12-month period shall not exceed 1% of the relevant class of shares in issue [69] - The aggregate maximum number of shares under the Share Award Plan and other share schemes shall not exceed 10% of the total issued shares as of the adoption date (121,768,000 shares) [67][68] - The first vesting period allows 50% of the awarded shares to be vested, while the second vesting period allows the remaining 50% [66] - The minimum holding period for an award before vesting is 12 months, but the board may determine a shorter period at its discretion [66] - The number of share awards available for grant under the Share Award Plan at the end of the reporting period was 50,978,000 [70][71] - During the reporting period, 70,790,000 share awards were granted under the Share Award Plan, representing approximately 5.83% of the company's issued share capital [70] - The ratio of shares issued for options and awards granted during the reporting period to the weighted average number of shares (excluding treasury shares) was 5.81% [70][71] - On 7 June 2024, 15,540,000 shares were awarded to connected persons of the company (excluding directors, chief executives, or substantial shareholders) [74] - A total of 51,140,000 shares were awarded to other selected participants on 7 June 2024 [75] - The share closing price on the date of grant (7 June 2024) was HK$3.86 per share [74][75] - The company repurchased 4,336,000 issued shares through the SEHK spot market at a total consideration of approximately HK$17,316,000, representing 0.36% of the issued shares as of 30 June 2024 [84][85] - The repurchased shares were canceled on 18 June 2024, with the purchase price per share ranging from HK$3.795 to HK$4.15 [84][86] - The share repurchase was based on the company's confidence in its long-term business prospects and potential growth, aiming to optimize the capital structure and improve earnings per share, net assets per share, and overall shareholder returns [84][85] - No equity-linked agreements were entered into by the company during the reporting period, except for the disclosed Share Award Plan [77][79] - The company confirmed compliance with the Model Code for Securities Transactions by Directors of Listed Issuers during the six months ended 30 June 2024 [81][83] - No incidents of non-compliance with the Employees Written Guidelines for securities transactions were noted during the reporting period [82][83] - The company did not hold any treasury shares as of 30 June 2024, and no other listed securities were purchased, sold, or redeemed during the period [87] Debt and Liquidity Management - The Group's debt maturing in less than one year as of 30 June 2024 is approximately RMB 5,020,000,000, representing 41.10% of total debts, compared to RMB 4,468,625,000 (38.41%) as of 31 December 2023 [50] - The gearing ratio (total debt divided by total assets) as of 30 June 2024 is 62.7%, a decrease of 1.3 percentage points compared to 31 December 2023 [52] - The Group's revenue and costs are primarily denominated in RMB, with some costs in HKD, USD, or SGD [45] - The consumer price index in China increased by 0.1% YoY for the six months ended 30 June 2024, with no significant impact on the Group's operating results [46] - The Group has no material contingent liabilities or significant litigation/arbitration as of 30 June 2024 [53][54] - No significant investments were made during the six months ended 30 June 2024 [56] - The Group is exposed to market risks including changes in product selling prices, raw material costs (mainly coal), and fluctuations in interest and exchange rates [42] - Commodity price risk arises from fluctuations in product sale prices and raw material costs [43] - Interest rate risk is primarily related to the Group's long-term debt obligations subject to floating rates [44] - The Group monitors liquidity risk by balancing funding continuity and flexibility through bank overdrafts and loans [50] - The Group's debt-to-asset ratio decreased to 62.7% as of the first half of 2024, down by 1.3 percentage points from 64% at the end of 2023 [174][176] - Total interest-bearing bank and other borrowings amounted to RMB 12,213,223,000 as of 30 June 2024, compared to RMB 11,633,132,000 at the end of 2023 [171] - Secured bank loans totaled RMB 1,528,279,000, secured by the Group's property, plant, and equipment [172] - Interest expenses capitalized to property, plant, and equipment during the period were RMB 4,070,000, a significant decrease from RMB 13,322,000 in the same period of 2023 [175][176] - Bank loans repayable within one year or on demand increased to RMB 4,731,317,000 as of 30 June 2024, up from RMB 4,088,482,000 at the end of 2023 [171] Investments and Disposals - Xinjiang XLX Energy Chemicals Co., Ltd. disposed of 100% equity interests in Manas Tianxin Coal CO., LTD for a total consideration of approximately RMB1,374 million [88][90] - No significant investments were made during the six months ended 30 June 2024 [56] - The company has no plans for material investments or capital assets as of 30 June 2024 [60] Employee and Training Information - The Group had 10,781 employees as of 30 June 2024, an increase from 10,390 employees as of 31 December 2023 [92][95] - Marketing personnel's performance commissions and bonuses decreased due to the decline in performance this year [92][95] - The Group provides ongoing training for all employees, including Directors and senior management, tailored to their specific fields of operation [92][95] - No significant events affecting the Group have occurred since the end of the reporting period [93][96] Dividend and Shareholder Returns - The company proposed a final dividend of RMB 0.24 per ordinary share for the year ended 31 December 2023, totaling approximately RMB 292,503 thousand, but did not declare any interim dividend for 2024 [150] - The final dividend for the year ended December 31, 2023, is RMB 0.24 per ordinary share, totaling approximately RMB 292,503,000, compared to RMB 307,030,000 for the year ended December 31, 2022 [152] Financial Reporting and Standards - The

Investment Rating - The report assigns a "Buy" rating for the company with a target price of 6.5 HKD, indicating an 83% upside potential from the current price of 3.6 HKD [3][2]. Core Insights - The company achieved a 26% year-on-year growth in net profit for the first half of 2024, exceeding expectations, despite a decline in fertilizer and fine chemical product prices [2][1]. - The strong cost advantage of the company allows it to maintain high profitability even during a downturn in urea prices [2][1]. - The increase in sales volume of efficient fertilizers contributes to an improvement in profit margins [2]. Financial Performance Summary - Revenue for the first half of 2024 reached 12.06 billion RMB, remaining flat year-on-year, while net profit attributable to shareholders was 690 million RMB, up 26% [2]. - Urea revenue was 3.83 billion RMB, a 9% increase year-on-year, with a 13% price decline but a 25% increase in sales volume, leading to a 2 percentage point increase in gross margin to 31% [2]. - Compound fertilizer revenue was 3.41 billion RMB, a 6% increase year-on-year, with a 6% price decline and a 13% increase in sales volume, resulting in a 6 percentage point increase in gross margin to 18% [2]. - The chemical business continues to expand, with methanol revenue increasing by 32% year-on-year to 1.29 billion RMB, and DMF revenue growing by 14% to 600 million RMB [2]. Future Outlook - The company is expected to experience a peak in capital expenditures from 2024 to 2026, with several new projects set to commence production, including a compound fertilizer project in Huludao and a 60,000-ton polyformaldehyde project in Xinjiang [2]. - To alleviate financial pressure and focus on its core business, the company has sold its 100% stake in Xinjiang Tianxin Coal Mine for 1.37 billion RMB, providing a one-time income boost [2].