text: Zhejiang Tonghuashun Cloud Software Co., Ltd.
1, a global leader in the fertilizer additive industry, two major measures to ensure steady growth in performance
1.1 global leader in the fertilizer additive industry, steadily growing in the first half of 2019
Hubei Fubon Technology Co., Ltd. was established in 2007 and listed on the Shenzhen Stock Exchange in 2014. The company is a leading company in the global fertilizer additive industry. The company's main business is the production, manufacturing and sales of fertilizer additives, providing overall solutions to global fertilizer production companies.
Company released its 2019 semi-annual performance forecast, and it is expected that the net profit attributable to shareholders of listed companies in the first half of 2019 will be RMB 48.8933 million to RMB 58.2063 million, an increase of 5%-25% over the same period last year.
In 2018, the gross profit margin of the company's main business was 34.93%. The gross profit margin of the company's main products, fertilizer additives, has been higher than 35% for a long time, which shows that the company's main products have good profitability in the market. The company's net profit margin has remained above 10% for many years, ensuring the company's subsequent development.
1.2 The basis of profitability of fertilizer additive enterprises: high-quality products + excellent technical services
The fertilizer additive industry belongs to the fine chemical industry, and its industrial chain is mainly composed of upstream basic chemical raw material suppliers, midstream fertilizer additive manufacturers, and downstream fertilizer production enterprises. Fubon Co., Ltd. belongs to the midstream fertilizer additive production enterprise.
Although fertilizer additives account for a small proportion of fertilizer costs, due to their greater impact on fertilizer production and product quality, and the rigid demand for fertilizers in agriculture, customers are less sensitive to the selling price of fertilizer additives, and have higher requirements for additive quality and service. High-quality products and excellent technical services are the basis of the profitability of fertilizer additive companies.
Company vigorously develops high-quality products and improves the level of technical services. On the basis of its near-maturity in its main business, it began to deploy digital agriculture in 2016. It has now launched digital agriculture business with soil as the entry point, including the provision of equipment and services such as soil testing and soil management, intelligent fertilizer distribution, and intelligent irrigation to help improve the overall efficiency of the planting chain.
1.3 Actively respond to changes in downstream demand, and two major measures to ensure stable growth
In recent years, important changes have occurred in the downstream of fertilizer additives. Since 2010, the national arable land area has dropped from 2.029 billion mu to 2.024 billion mu in 2017. At the same time, the 2015 "Action Plan for Zero Growth of Fertilizer Usage by 2020" puts forward the goal: "From 2015 to 2019, the annual growth rate of fertilizer use will be gradually controlled within 1%; strive to achieve zero growth in the use of fertilizers for major crops by 2020."
With the introduction of the "Plan", the domestic fertilizer application volume began to decline after 2015, and dropped to 58.59 million tons in 2017, a year-on-year decrease of 2.08%. At the same time, domestic fertilizer production has also begun to decline since 2016, and has dropped to 54.5961 million tons in 2018, a year-on-year decrease of 5.2%. It can be seen that due to the decline in downstream fertilizer production, the overall domestic demand for fertilizer additives is inevitable.
In order to respond to changes in the downstream fertilizer production industry demand, the company has taken two major measures to ensure stable performance growth:
1.3.1 PSC model establishes a brand moat and enhances competitive barriers
PSC comprehensive service model, namely, customizes formula products based on customer needs and goals, formulates overall technical solutions (Solutions) based on the production process and variety structure of fertilizer enterprises, and price them in contract form (Contractor): Under the PSC model, the company forms a close strategic cooperative relationship with customers, mainly reflected in: (1) The company participates in the production process of fertilizers, shares information flow and technical flow with fertilizer enterprises, and forms a close cooperative relationship with fertilizer enterprises by providing long-term technical services and on-site guidance; (2) Both parties settle the production of fertilizers of qualified quality processed, and the company forms a community of interests with customers.
Fubon Co., Ltd. builds a brand moat through the innovative PSC model and enhances competitive barriers to cope with industry changes. The company has provided customers with the overall solution of "differentiated products + full-process technical services + automatic control system" to form a win-win community with large fertilizer production companies.
PSC model diagram
1.3.2 Continue to expand overseas markets, overseas revenue accounts for 50.66% in 2018
According to the "World Fertilizer Trends and Outlook 2020" released by the Food and Agriculture Organization of the United Nations (FAO), globally, the total demand for fertilizers will reach about 200 million tons in 2020, and will maintain a growth rate of 1.5%-2.0%. Specifically in the five continents, Africa's demand growth rate in nitrogen, phosphorus, and potassium fertilizers and ranks first among all continents. The CAGR of the demand for the three in 2015-2020 was 3.78%, 2.76%, and 6.75%, respectively, which was significantly higher than the total demand for the three in the world during the same period. CAGR 2.24pct, 0.57pct, and 4.31pct. It can be seen that there is still a lot of room for development for fertilizer additives from manufacturers that supply fertilizers to the corresponding regions.
company opened the door to the African market through cooperation with the Moroccan OCP Fertilizer Group in the fields of digital agriculture and fertilizer additives; integrated the north-south European market through mergers and acquisitions of Noveka and French PST; and enhanced profitability in the Southeast Asian market by providing new products. In 2018, the company's overseas revenue exceeded domestic revenue for the first time, achieving overseas revenue of 292 million yuan, accounting for 50.66% of the annual revenue, an increase of 31.85% year-on-year; in terms of gross profit margin, compared with the company's domestic and overseas gross profit margin from 2015 to 2018, the overseas gross profit margin was higher than the domestic gross profit margin every year.
2. Layout digital agriculture, a new look begins again
2.1 Layout digital agriculture with soil as the entrance, and the global acquisition of agricultural "black technology"
company began to make efforts in the field of digital agriculture in 2016, and in 2018, it determined to use digital agriculture as the development strategy. At present, the company has now formed a digital agricultural layout with soil as its entrance through the acquisition of agricultural "black technology" around the world. According to the company's announcement, in the first half of 2019, the revenue of the company's digital agriculture business segment has begun to appear.
2.1.1 Soil detection technology builds the agricultural Internet of Things
takes soil detection as the entrance, and builds the agricultural Internet of Things through SoilOptix soil detection technology to improve the efficiency of soil data acquisition and help new models of soil improvement.
SoilOptix soil detection technology uses artificial intelligence big data mining algorithm to generate high-resolution data soil maps, use secondary analysis of soil big data to guide planting planning, and accurately fertilize.
has established the first digital soil data service platform in China in combination with Internet technology, 3S technology and information technology, and standardized operations are carried out through the processes of soil extraction planning, on-site soil extraction, laboratory testing, data filing and result output, and data visualization is performed through the visual WEB system.
In the first half of 2019, the holding subsidiary Canada SoilOptix rapid soil testing service has been provided in Canada, the United States and other countries.
Comparison of traditional soil measurement and digital soil measurement
2.1.2 Intelligent fertilizer distribution technology promotes agricultural production "three savings, one more" (saving worry, saving time, and making more money)
uses intelligent fertilizer distribution as an export, based on SoilOptix soil detection technology, and combines intelligent fertilizer distribution machines, Tianxiaoer App, and new fertilizers to build a new agricultural supply model to effectively increase crop yield.
intelligent fertilizer dispensing machine seamlessly connects with the soil database through built-in smart fertilizer dispensing software, combines mobile APP with one-click ordering, cloud soil testing and formula calculation, automatic fertilizer dispensing and remote monitoring, improve fertilizer dispensing efficiency, and meet the diversified and personalized special fertilizers needed by crops.
Tian Xiaoer APP is a mobile management software serving agricultural production and refined planting. It not only provides soil testing and intelligent fertilizer distribution services for farmers, but also helps farmers measure the area of fields, establish their own farmland files, and obtain agricultural production data such as field soil, meteorology, and remote sensing.
Intelligent fertilizer distribution machine (Source: Fubon Co., Ltd. official website)
2.1.3 Precision irrigation helps crop quality and increase yield
With precise irrigation as an auxiliary, the stem water potential sensor developed by Saturas, Israel, which is owned by the company, scientifically guides irrigation, optimizes fertilization plans, and helps crop growth, improves quality and increases yield. In the first half of 2019, Saturas stem water potential sensor technology has been implemented and promoted in the domestic economic zone, and the company has its only priority cooperation rights in the Chinese market.Saturas stem water potential sensor and precision irrigation decision-making system can help customers quickly establish an efficient and scientific planting management system at a lower cost. Combined with Herui floating fertilizer, Pangu soil test, Comai fertilizer dispensing machine, Tian Xiaoer and other products and technologies under Fubon Co., Ltd. , customers can enjoy the best solutions.
Saturas sensor diagram (Source: Saturas Company official website)
2.1.4 Value-added fertilizers increase crop yield
Fubon Co., Ltd. Nutritional masterbatch developed based on independent intellectual property rights is a new type of fertilizer that masters core technologies. It can effectively increase the quality of fertilizers, reduce pests and diseases, and help farmers save money and produce high yields.
Company has mastered the core technologies for the production of a variety of high-efficiency medium and trace element nutritional masterbatches and medium and trace element nutritional wrapping technology, which can provide the simplest technical solutions for the upgrade of urea, compound fertilizer, diammonium phosphate, etc.
, the round-grained potassium fertilizer developed based on "potassium fertilizer granulation technology" and "automated continuous drum granulation process of agglomeration method", has the advantages of high strength, less dust, and uniform particles. It has been sold to North America and Southeast Asian countries.
2.1.5 Crop Estimation Technology Guide Scientific Planting
Israel Fruitspec, which is owned by the company, has developed an algorithm to predict fruit yield by scanning cash crops by scanning cash crops. The two hyperspectral sensors are installed on a vehicle suitable for driving in the cash crop area, and the cash crops on both sides are scanned one by one. The obtained image data is uploaded to the on-board computer for analysis, which can generate fruit quantity statistical map , fruit diameter statistic map, fruit distribution heat map, fruit yield prediction map, etc.
Israel Fruitspec can estimate fruit yield in advance, understand the quantity, diameter and weight of fruits, provide scientific basis for customers to effectively remove fruits, apply medicines and fertilize, and effectively improve the quality of fruits; it can provide effective support for customers to reasonably plan picking, refrigeration, storage and logistics, which will effectively save costs.
Israel Fruitspec scan image
2.2. Work with Heda Technology to deeply explore the needs of the planting chain and create a new model of agricultural services
Heda Technology is the digital agricultural technology development platform of Fubon Co., Ltd. . Relying on the agricultural "black technology" acquired by Fubon Co., Ltd. , it has built an intelligent agricultural service platform to help Fubon Co., Ltd. deeply explore the needs of the planting chain.
Heda Technology's main products (Source: Heda Technology official website)
Heda Technology has created an innovative model "one platform, two ports, and three services", that is, an ecological operation platform for the planting industry, with soil big data as the entrance and intelligent fertilizer distribution as the export, providing three service models, including: 1) the "7-11" model based on husband-and-wife stores; 2) the "Muji" model aimed at high-end single products; 3) serve the government, help one county and one product, targeted poverty alleviation, and achieve rural revitalization.
Heda Technology's boost to listed companies' digital agriculture performance may be mainly achieved through three ways: 1) Because Heda Technology provides technical services to the outside world, the equipment and products of the subsidiary of Fubon Co., Ltd. can be sold on and on. This method is currently underway, and intelligent fertilizer dispensing machines, new fertilizers, and fertilizer additives are sold because Heda provides intelligent fertilizer dispensing and digital agricultural services to the outside world. In 2019, Fubon Co., Ltd. will use soil testing technology, smart fertilizer dispensing machines, Tianxiaoer digital agricultural service platform, nutritional masterbatch and other technologies and equipment and products to create industry routers, support the opening of 1,000 new "smart fertilizer dispensing husband-and-wife stores" to support farmers' innovation and entrepreneurship; 2) Fubon Co., Ltd. will enable its subsidiary that provides digital agricultural technology to share profits of Heda Technology's profits from the use of related technologies; 3) Fubon Co., Ltd. After Heda Technology's digital agricultural application business is relatively mature, it will reorganize its assets with listed companies through equity acquisitions and other means.
Heda Technology is a key platform for Fubon Co., Ltd. to realize the monetization of digital agricultural technology. Its accelerated commercialization of digital agricultural applications will directly drive the performance of Fubon Co., Ltd. , and is expected to form a new pillar of the company's performance after fertilizer additives.
3. Business segment adjustment and equity incentive plan to help digital agriculture transformation
On June 30, 2019, the company issued an announcement, intending to transfer fertilizer additive-related businesses to its wholly-owned subsidiary Fubon New Materials. After the transfer is completed, the company's business will be adjusted to a holding management platform with strategic planning, resource management, risk control, etc. as the main functions, and as a R&D and promotion platform with digital agriculture as the core, it will manage various business segments within the scope of the company's merger. Re-sorting the business line will help improve the company's business synergy efficiency and help improve performance in the second half of the year.
On June 30, 2019, the company announced the "2019 Stock Options and Restricted Stock Incentive Plan (Draft)", intending to grant a total of 7 million equity to the incentive targets. The incentive targets are senior management personnel, middle-level management personnel, core technology (business) personnel, and employees who have a direct impact on the company's operating performance and future development, with a total of 47 people. The upward channel of the company's employees is smooth, and employees' efforts are closely related to the company's growth, forming a good cycle with the company's continuous acceleration of development, which may be expected to promote the company's high performance growth in the long run.
4. Summary
Fubon Co., Ltd. As a leading enterprise in the global fertilizer additive industry, it has the ability to continuously produce high-quality products, provide excellent technology, and achieve stable profits! Establish a brand moat through the innovative PSC model and enhance competitive barriers; seek revenue growth points by continuously expanding overseas markets; use soil as the entrance and rely on soil testing, intelligent fertilizer distribution, precise irrigation and other technologies to lay out digital agriculture; work with Heda Technology to deeply explore the needs of the planting chain and create a new model of agricultural service; the recent adjustment of business segments and the implementation of equity incentive plans will help the transformation of digital agriculture! The three troikas of "PSC + overseas layout + digital agriculture" will surely ensure the company's steady growth in the future!
Risk warning
This article was compiled by Zhejiang Tonghuashun Cloud Software Co., Ltd. based on public information, but the company does not guarantee the accuracy and completeness of these information. The content and opinions in the report only reflect the company's judgment on the day of release of this report, and the prediction methods and results have certain limitations. At different periods, the Company may issue reports that are inconsistent with the opinions and predictions published in this report, but the Company has no obligation or responsibility to update the contents involved in this report in a timely manner and notify customers.
The above views and analysis processes are for reference only and do not constitute bids or levies for the purchase and sale of the securities mentioned. In no event shall the information or opinions expressed in this report constitute securities trading advice to anyone.
The Company and its employees do not promise that investors will make a profit or share investment income with investors. Under no circumstances will our Company and its employees be liable for any direct or indirect losses arising from any person's use of this report and its contents.
Source: Tonghuashun Financial Research Center
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