What is the future of Bata?

Our company is a professional compound fertilizer manufacturer. Batian Co., Ltd. specializes in the production of compound fertilizer. At present, the capacity of compound fertilizer is 6.5438+0.2 million tons/year (including 300,000 tons/year in Guigang Phase I, which was put into trial production in July 2007). After the fundraising project is put into production, the compound fertilizer production capacity will reach 6.5438+0.65 million tons/year (excluding 6.5438+0.5 million tons/year to be eliminated), and it is a major compound fertilizer production enterprise in China.

The competition in compound fertilizer industry is fierce and the profit of products is meager. The production of compound fertilizer is simple, with less investment and low entry threshold. At present, there are 3000~4000 domestic compound fertilizer production enterprises, and the production capacity has rapidly expanded from 7.55 million tons/year in 2000 to more than 40 million tons/year at present. The overcapacity is serious, the industry competition is fierce, and the profit of compound fertilizer products is meager.

The company has established a relatively complete production layout and sales network. The company has established production bases in Shenzhen, Xuzhou, Wuqianqi, Inner Mongolia and Guigang, Guangxi, effectively covering major markets in Guangdong, Shandong, Guangxi and Hainan, which not only reduces logistics costs, but also helps to expand the company's market share. In addition, the company has established a sales network covering more than 20 provinces, 600 county-level dealers and nearly 10000 township retail terminals, and implemented an in-depth distribution strategy for major sales markets.

The increase in sales promoted the growth of the company's performance. Driven by the perfect production layout and sales network, the company's compound fertilizer production and sales increased by 36% annually from 2004 to 2006. With the expansion of the production scale of Xuzhou base and the completion of Guigang base, the company's compound fertilizer production and sales volume is expected to continue to grow rapidly, with an average annual growth rate of 26% from 2006 to 2009, which will become the main driving force for the company's future performance growth.

The reasonable valuation is 17.4 yuan. It is estimated that the diluted earnings per share from 2007 to 2009 will be 0.46 yuan, 0.58 yuan and 0.66 yuan respectively, and the net profit will increase by 1 1.5%, 25.7% and 13.7% respectively. Considering the current competitive situation of compound fertilizer industry, the company's future performance growth and the valuation level of small and medium-sized chemical listed companies, the company was given a dynamic P/E ratio of 30 times in 2008, and the corresponding reasonable valuation was 65,438+07.4 yuan.

Risk warning: the main risks faced by the company are the risk of falling profit level and the risk that the production and sales of compound fertilizer are lower than expected.

Valuation analysis

Batian Co., Ltd. specializes in producing compound fertilizer. At present, no listed company is completely similar to the company's product structure. Considering that compound fertilizer also belongs to chemical fertilizer industry, we can refer to chemical fertilizer listed companies for relative valuation.

Table 1 gives the current valuation of some fertilizer listed companies, of which the average P/E ratio in 2008 is 29 times.

Considering the fierce competition in the compound fertilizer industry, the company's future performance growth and risks, the company was given a dynamic P/E ratio of 30 times in 2008. Based on the diluted earnings per share of 0.56 yuan in 2008, the corresponding reasonable valuation is 17.4 yuan.

Considering that the average increase of small and medium-sized chemical enterprises on the first day of listing is above 80%, the company's share price on the first day of listing will exceed the above valuation range.

This company is one of the major compound fertilizer manufacturers in China.

Batian Co., Ltd. specializes in producing compound fertilizer.

Batian Co., Ltd. specializes in producing and selling compound fertilizer. At present, we have established production bases in Shenzhen, Guangdong, Wuqian Banner, Inner Mongolia, Xuzhou, Jiangsu and Guigang, Guangxi, and have many brands and series of compound fertilizer products such as Batian, Haller, Cody, China, America, China and Russia, and China and Norway.

At present, the company has a compound fertilizer production capacity of 6.5438+200,000 tons/year (of which the first phase of 300,000 tons/year was put into production in July 2007), and achieved a compound fertilizer sales volume of 5.565438+600,000 tons in 2006. It is one of the major compound fertilizer manufacturers in China.

This company is a typical family-run private enterprise.

The actual controller of the company is Mr. Huang Peizhao, who holds 45% of the company's equity (pre-issuance ratio), and his family members Huang, Huang Shuzhi and Huang Peishu directly or indirectly hold the company's equity. Most of the shares of the company are in the hands of the Huang family, which is a typical family-owned enterprise.

In addition, some management members of the company hold shares in the company. Among the shareholders in the above picture, Zhang Zhixin is the company's vice president and Wu is the company's vice president and secretary of the board of directors.

The competition in compound fertilizer industry is fierce, and the profits of enterprises are meager.

Compound fertilizer conforms to the development direction of the industry, and the national policy encourages the development of compound fertilizer industry. In recent years, the country has vigorously promoted the application of "recommended fertilization", "soil testing fertilization", "formulated fertilization" and "balanced fertilization", requiring fertilizer manufacturers to provide fertilizers with complete nutrients, high nutrient content, reasonable formula, uniform particles and high strength, and high-quality and high-concentration compound fertilizers to meet this demand, and the compound rate of fertilizers in China is constantly improving.

Nevertheless, at present, the compound fertilizer rate in China is less than 30%, while the use of compound fertilizer in developed countries accounts for about 80% of the total fertilizer. According to the requirements of the Ministry of Agriculture, the compound fertilizer rate in China will reach 50% by 20 10, and there is still a lot of room for growth of compound fertilizer in the future.

Low barriers to entry and serious overcapacity have led to fierce competition.

The compound fertilizer industry has great development potential, but the technical threshold and capital threshold for entry are low. A large number of new entrants poured in, and the original simple fertilizer production enterprises were also competing for compound fertilizer projects, which led to the rapid expansion of domestic compound fertilizer production capacity.

In 2000, the capacity of compound fertilizer (including compound fertilizer, the same below) in China was 7.55 million tons/year, and reached17.07 million tons/year in 2005, but the current capacity has exceeded 40 million tons/year, exceeding the total demand by 30% ~ 50%. According to experts' prediction, the growth rate of compound fertilizer production capacity will still be above 20% in the next two years, while the demand growth rate will only be around 8%, and the overcapacity situation of compound fertilizer will still intensify.

Not only the entry threshold is low, the homogenization of compound fertilizer products is serious, and the quality difference is difficult to identify, but also farmers' buying behavior is mostly influenced by retailers, so it is difficult for dominant enterprises to establish good brand recognition and consumer loyalty, thus providing a good living soil for compound fertilizer enterprises with poor quality and small scale.

According to incomplete statistics, there are more than 2,000 enterprises with compound fertilizer production licenses in China, and there are 3,000 ~ 4,000 compound fertilizer enterprises in China, plus unregistered small compound fertilizer enterprises and production workshops in various places.

There is a serious overcapacity, and various kinds of compound fertilizer production enterprises are mixed, and the industry competition is fierce.

The profit of compound fertilizer products is meager.

Compound fertilizer is made of nitrogen, phosphorus, potassium and other simple fertilizers in a certain proportion. Its production process is short and simple, and the purchase cost of simple fertilizer accounts for more than 70% of the production cost of compound fertilizer, so the profit earned by compound fertilizer enterprises is actually only the processing fee.

Due to the serious overcapacity of compound fertilizer and fierce competition in the industry, compound fertilizer enterprises have been operating at a low profit.

Moreover, the profits of compound fertilizer manufacturers are also squeezed by terminal retailers. In China's agricultural consumption pattern, terminal retail is very important for the sales of compound fertilizer products, but most domestic compound fertilizer production enterprises have not yet established an independent sales network, mainly through local retailers. Because farmers can easily identify fake compound fertilizer products (stealing nutrients), even if brand-name compound fertilizer manufacturers greatly benefit retailers, they can obtain higher profits through counterfeiting. This forces the regular compound fertilizer production enterprises to greatly benefit the terminal retailers, otherwise it is difficult to obtain the sales support of retailers.

Terminal is king, and the sales network determines the competitive advantage of compound fertilizer enterprises.

China's agricultural production system has the characteristics of small and scattered planting area. The planting area of each farmer is only a few acres to dozens of acres, and the planting system is also very complicated. It is difficult for compound fertilizer production enterprises to provide farmers with direct differentiated services. Therefore, farmers' awareness and loyalty to compound fertilizer brands and manufacturers are relatively low, and many times farmers buy according to the recommendation of retailers.

In this agricultural consumption mode, terminal retail plays a vital role in compound fertilizer products. Establishing a good sales network to strengthen the control of retail terminals is conducive to strengthening the influence on consumers (farmers), establishing good brand awareness and consumer loyalty, thus laying the foundation for expanding the company's sales.

Therefore, we believe that the future competition focus of compound fertilizer industry lies in the construction of sales network, and only compound fertilizer enterprises with good sales network can establish their dominant position in the fierce competition.

The increase in sales promotes the growth of the company's performance.

The company has established a relatively complete production layout and sales network.

Batian shares have established a relatively complete production layout. At present, four production bases have been established in Shenzhen, Guangdong, Wuqianqi, Inner Mongolia, Xuzhou, Jiangsu and Guigang, Guangxi, effectively covering the main sales markets of compound fertilizer products in Guangdong, Guangxi, Shandong and Hainan. Establishing production bases near major markets can effectively reduce logistics costs and fully grasp the changes in local market demand, thus helping to expand the company's market share.

The increase in production and sales promotes performance growth.

In the past few years, driven by the rapid growth of compound fertilizer production and sales, the company's performance has also achieved rapid growth. With the completion of Guigang base in Guangxi and the second phase project in Xuzhou, the production and sales of compound fertilizer are expected to maintain a rapid growth momentum and promote the company's performance growth.

Based on the above analysis, we expect that the company will realize earnings per share of 0.46 yuan, 0.58 yuan and 0.66 yuan respectively from 2007 to 2009 (calculated by post-IPO share capital).