The Zhitong Finance App learned that CICC released a research report stating that it maintains the China Heart Link Chemical Fertilizer (01866) “outperforms the industry” rating, with a target price of HK$14.50. The bank kept its 2027 net profit forecast unchanged. The bank is optimistic that sales growth of urea and compound fertilizer will drive profit growth. The current stock price corresponds to a price-earnings ratio of 7.1/5.1 times 2026/27, and the target price corresponds to a price-earnings ratio of 10.7/7.7 times 2026/27. There is 51.8% upside compared to the current stock price.
CICC's main views are as follows:
3Q26 results are in line with market expectations
The company announced results for the third quarter of 2026. In the first three quarters of 2026, the company achieved operating income of 23.047 billion yuan, an increase of 28.3% year on year; net profit to mother was 1,138 billion yuan, an increase of 42.3% year on year, and the performance was in line with market expectations. In the third quarter of 2026, the company achieved operating income of 7.307 billion yuan, an increase of 37.9% over the previous year, and realized net profit of 217 million yuan to mother, an increase of 8.3% over the previous year.
By product, urea revenue has increased, and the share of high value-added products in the chemicals sector has increased
In the third quarter of 2026, Urea achieved revenue of 2,376 billion yuan, an increase of 80.2% year on year and 17.6% month on month. Benefiting from the increase in export scale and the increase in sales scale of high-value-added black urea products, the unit price of urea increased 4% year on year to 1,851 yuan/ton; due to centralized maintenance and rising coal prices, gross margin fell 9.8 percentage points to 16.8% year on year. Compound fertilizer achieved operating revenue of 1,343 billion yuan. The delayed pace of fertilizer preparation in the fall led to a delay in the release of downstream demand. Due to rising raw material costs and marketing reforms, the price of compound fertilizer increased 8% year-on-year to 2,755 yuan/ton. The operating income of melamine, DMF, and polyformaldehyde increased by 3.6%, 80.8%, and 18.2%, respectively, to 177 million yuan, 379 million yuan, and 120 million yuan; gross margin increased 0.8, 6.2, and 9.1 percentage points, respectively. The chemicals sector leverages the advantages of coal-to-methanol integration and flexible regulation, increasing the share of high value-added products.
Production expansion is progressing steadily, and the equity incentive plan shows confidence
According to the company's announcement, in September, the urea plant for the new chemical materials project at the Xinxiang base was put into operation, driving the unit production costs of liquid ammonia and urea at the Xinxiang base to drop by 45 yuan and 26 yuan respectively. As of the third quarter of 2026, Zhundong, Xinjiang has entered the joint testing phase, and construction of the Guangxi base project continues to advance. The two projects are scheduled to be put into operation in the fourth quarter of 2026 and the third quarter of 2027, respectively. The bank believes that steady expansion of production is expected to continue to drive the company's growth.
On October 26, the company announced the share incentive plan. The ownership conditions are that the operating income of 2027 and 2028 will increase by 5% and 15%, respectively, compared to 2026, or that net profit will not be less than 1.8 billion yuan and 2 billion yuan, respectively. The bank believes that equity incentives are expected to motivate the team, and that ownership conditions reflect the company's confidence in mid-term development.
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The price of urea fell sharply; progress in new urea production capacity fell short of expectations.