Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 6.5, indicating an 83% upside potential from the current price of HKD 3.6 [4][2]. Core Insights - The company's net profit attributable to shareholders decreased by 15% year-on-year in Q1 2024, aligning with expectations. Revenue for the same period reached HKD 57.5 billion, down 8% year-on-year [2][4]. - The relaxation of urea export policies is expected to alleviate domestic supply pressure and support price increases, positively impacting market sentiment [2][4]. - The company is focusing on optimizing its sales structure and promoting high-efficiency fertilizers to counteract the negative effects of price declines, ensuring a stable gross margin [2][4]. Financial Performance Summary - In Q1 2024, urea revenue was HKD 19.9 billion, a 2% increase year-on-year, despite a 19% drop in prices. The gross margin for urea remained stable at 30% [2]. - Compound fertilizer revenue was HKD 14.3 billion, down 8% year-on-year, with a gross margin of 14.7%, up 3 percentage points [2]. - The company reported a 8% year-on-year increase in melamine revenue, reaching HKD 2.1 billion, with a gross margin of 43%, up 5 percentage points [2]. - DMF revenue grew by 12% year-on-year to HKD 2.9 billion, with a gross margin of 12%, also up 5 percentage points [2]. Production Capacity Expansion - The company is expanding its production capacity with new projects, including a 700,000-ton urea project in Xinxiang and a second-phase DMF project in Jiangxi, which are expected to enhance production capabilities and reduce costs [2][4]. - Additional projects scheduled for 2024 include a 60,000-ton polyoxymethylene project in Xinjiang and a 300,000-ton compound fertilizer project in Guangxi [2][4].
尿素出口政策放松，提振市场情绪