COFCO Sugar (600737) 2018 Annual Report Comments: Falling Sugar Prices Drag Down Company Performance and Output Decline Usher in Bottom of Cycle
Event: The company released its 2018 annual report on April 15, 2019.
In 2018, the company achieved total operating income of 175.
1.5 billion, down 8 every year.
57%; achieve net profit attributable to mother 5.
04 billion, down 31 every year.
The downturn in the sugar market has affected company profits.
In 2018, due to the weakening of the El Ni?o phenomenon, sugar production in the three major sugar producing countries increased, and international sugar prices fluctuated.
Due to the high price of sugar in the early stage, the domestic planting area has increased, leading to an increase in domestic sugar production.
Incorporating international sugar prices has dragged down, domestic sugar prices have entered a downward phase of the cycle, and the average sugar price has dropped by more than 20%.
In 2018, the company improved the yield of refined sugar and reduced costs through technology upgrades, and sold ahead of time to lock in prices. The company’s self-supply sugar business still realized profit after accruing inventory impairment.
Benefit from the company’s better sugar storage and sales channels, as well as reports, although the company’s sugar production has decreased by one.
87%, but sales are up 19 per year.
43%, stocks fell 8% year-on-year.
In addition, the company’s 49% shareholding unit “Tunhe Cement” changed in 2018, which affected the company’s performance.
Falling sugar prices weighed on profitability.
Affected by the decline in commodity prices, the company’s gross profit margin for sales fell in 20181.
54 averages, 14.
Among them, the gross profit margin of trade sugar has decreased by 0 every year.
With 62 digits, the gross profit margin of self-produced sugar has decreased year by year3.
For 20 digits, the gross profit margin of processed sugar drops by 6.
Net sales margin for 2018 was 3.
18%, a decline of 0 per year.
The management expense ratio (including R & D expenses) increased by 0 due to the expansion of the scale.
05 number; sales expense ratio rose by 0.
66 budgets, each decrease in financial expense ratio.
In 2019, it is expected that the sugar cycle will be reversed.
According to the International Sugar Organization (ISO) ‘s monthly report on January 8, 2019, sugar production forecasts for the three major producing countries in 2019.
Among them, India will become the world’s largest sugar producing country for two consecutive years, but due to the gradual expansion and reduction, and the crop infected with white beetles, the output is expected to decline this year; the Thai Sugar 返回码: 404 网站打不开?重查 Corporation estimates that the Thai sugar production in the 2018/19 crushing season will beIn the 1350s, it was down from the 120s compared with the previous crushing season.
In Brazil, due to rising crude oil prices, in order to increase profits, sugar cane may produce more ethanol, which will also lead to reduced sugar production.
The decline in sugar production in the world’s major sugar producing countries will cause the global sugar market in the 2019/2020 crushing season to face a gap of 200 tons, and the oversupply phase of the sugar market will end.
The decline in international sugar production has pushed up international sugar prices. At present, the futures price of ICE11 sugar in New York has shown an upward trend.
The increase in international sugar prices and the previous tariff policy on imported sugar may lead to a decline in sugar imports in 2018/2019 and accelerate consumption of sugar inventories.At the same time, the low sugar price will also affect the previous sugar planting area, resulting in a tightening of sugar supply and demand.
Therefore, the sugar cycle is expected to reverse this year.
The sugar cycle inversion is expected to improve the company’s performance.
Investment suggestion: Upgrade to recommended level.
The current period is at the bottom of the sugar cycle downlink. In the future, sugar price reversals are expected to improve the company’s performance, so it is raised to the recommended level.
The company’s 2019-2020 EPS is expected to be 0.
41 yuan, 0.
63 yuan, corresponding to PE is 28 times, 18 times.
Risk reminders: natural disasters, product price fluctuations, policy changes, etc.