Incident: The company released its 2021 performance report. In 2021, the company achieved net profit of 202 million yuan, an increase of 304.65% over the previous year; 21Q4 achieved net profit of 41 million yuan, an increase of 1087.89% over the previous year.
Benefiting from strong supply and demand for erythritol, the company's performance improved dramatically in '21. With the rapid increase in consumer demand for sugar substitutes, there was a large gap between supply and demand for erythritol in 2021, showing a larger increase compared to the same period in '20. As the first industrialized erythritol company in China, the company has rich customer resources and sufficient order volume. Furthermore, the company's new production capacity was implemented at an accelerated pace, and the erythritol production capacity was expanded to 30,000 tons in 2021Q3. We expect another 30,000 tons of additional production capacity to be released in mid-2022, providing a strong guarantee for subsequent sales growth.
Placing aloxone sugar ahead of schedule is expected to form new performance growth points
Alloxaccharide has the advantages of high sweetness, good solubility, low calories, and low blood sugar. It has been approved by many countries around the world, and there is plenty of market space. The company is the largest producer of aloxone sugar in China. The technology is relatively mature. It currently has a production capacity of 7,000 tons, with a fixed increase of 30,000 tons. We expect that part of the production can be put into operation in 2022, with a first-mover advantage. Currently, domestic approval has not been passed, and all products are exported and sold. As global demand continues to grow and domestic policies are gradually liberalized, alloxaccharide is expected to become the company's second growth curve.
As a leading functional sugar company, the company's core advantages are obvious
We believe that the company's competitive advantage is mainly reflected in three aspects: 1) The company's advantages in the whole industry chain: the company is the only manufacturer and service provider of a full range of functional sugar products in China, which can fully meet the diverse needs of downstream customers; 2) R&D advantage: The company has strong R&D capabilities to continuously create food and beverages that meet health trends; 3) Brand and market advantage: The company has continued to strengthen marketing and program marketing capabilities for major customers over the years, tailor-made solutions for customers, and strong customer stickiness.
Equity incentives showed confidence in development, and the goals of the first phase were successfully achieved
In September '21, the company released an equity incentive plan, which deeply binds core executives and technical personnel. According to the draft plan, the assessment target is to achieve operating income of 26.0/37.5/45.0 billion yuan in 2021-2023, with a CAGR of 31.6%; net profit of 1.5/26/34 billion yuan, and a CAGR of 50.6%.
Profit forecasting and investment advice
We believe that under the major trend of sugar reduction, the company, as a leading functional sugar company, is expected to achieve rapid growth in performance through the company's own advantages. Revenue for 2022-2024 is expected to be 3.78/46.8/5.50 billion yuan respectively, net profit of the mother is 2.8/36/4.2 billion yuan respectively, EPS is 0.8/1.0/1.1 yuan, and the corresponding PE is 15.4x/12.1x/10.4x respectively, maintaining the “buy” rating.
Risk warning: industry competition intensifies; downstream customer demand fluctuates; company product sales fall short of expectations; risk of approval failure
