Key points of investment:
Non-net profit for the first quarter was 97.62 million yuan, an increase of 92.41% over the previous year. The company announced that it achieved revenue of 294 million yuan in the first quarter, an increase of 34.65% over the previous year, and the net profit of the mother was 98.47 million yuan, an increase of 89.97% over the previous year, after deducting non-net profit of 97.62 million yuan, an increase of 92.41% over the previous year. In September 2021, the third phase of the disinfectant project of the Matsukishima branch began trial production, adding production capacity of CIT/MIT12000 tons or MIT 2000 tons, BIT 2,500 tons, OIT1200 tons or DCOIT 600 tons. The company currently has a total production capacity of more than 40,000 tons of industrial disinfectants, making it the original drug manufacturer of isothiazolinone industrial disinfectants with the largest production capacity in China and even Asia. The advantages of stable supply capacity and scale effect are obvious.
Prices of industrial disinfectants continue to rise. Affected by the sharp rise in raw material prices in 2021, the company adjusted product prices accordingly. According to the Commerce Agency, the price of the industrial disinfectant isothiazolinone currently exceeds 20,000 yuan/ton. Compared with the beginning of September last year, the price is 33% higher than at the beginning of September last year, and has maintained an upward trend. In the first quarter of '22, the average price of CIT/MIT series products was 20,000 yuan, up 58.65% year on year, up 11.62% month on month. The average price of OIT series products was 140,000 yuan, up 6.36% year on year, up 4.31% month on month. The average price of BIT series products was 830,000 yuan, up 98.75% year on year, up 17.29% month on month.
The domestic market is highly concentrated, and production capacity from overseas has been transferred domestically. In the domestic pharmaceutical production sector, production capacity concentration is high, and a stable competitive pattern has been formed where a small number of leading companies occupy the market. Internationally, international chemical companies with production capacity for original pharmaceuticals, such as Oshada and Britain's Sol, are gradually shifting their focus to more profitable downstream technical services and compounding fields. Production of original pharmaceuticals is showing a trend of shifting to developing countries. The company's products have obtained US EPA and European BPR registration, and are eligible for export to major overseas markets. With reliable product quality and stable supply capacity, the company has established stable long-term cooperative relationships with core domestic and foreign customers such as LANXESS Chemical, Oshada, Troy, etc., and has become a high-quality partner for major downstream sterilization and mildew prevention service companies.
Set up industrial mergers and acquisitions funds to accelerate the integration and expansion of the industrial chain. The company announced that it plans to use its own capital of 50 million yuan to jointly initiate the establishment of a fine chemical industry merger and acquisition fund with Hangzhou Lechen and Gong Cheng to find high-quality domestic and foreign targets in fine chemical-related fields. The establishment of an industrial merger and acquisition fund is mainly to improve the profitability of the company's assets, discover and cultivate high-quality projects in the new fine chemical industry, accelerate the integration of the company's industrial chain and extend profit forecasting. We expect the company's net profit for 2022-2024 to be 411 million yuan, 466 million yuan and 528 million yuan respectively, while EPS will be 1.57 yuan/share, 1.78 yuan/share and 2.02 yuan/share respectively. We gave the company 13-15 times PE in 2022, and the corresponding reasonable value range was 20.41-23.55 yuan/share. For the first time, coverage was given a superior rating than the market.
Risk warning. Risk of falling product prices, risk of fluctuations in raw material prices, risk of exchange rate fluctuations.