Events:

The company announced that it plans to issue convertible bonds to unspecified objects with a total amount of no more than RMB 1.2 billion. It is used for ossification alcohol raw material drug project, ossification alcohol preparation project, annual production of 6000 tons of vitamin An and 20000 tons of vitamin E powder project, annual production of 5000 tons of vitamin B6 project, annual production of 5000 tons of biotin project and high-end generic drug research and development project. When all the planned projects reach production, the feasibility report estimates that the average annual income will reach 4.463 billion yuan and the average annual profit will reach 1.666 billion yuan.

The strategy of "one vertical and one horizontal" has landed, and the company's development thinking is clear.

The company revolves around the "one vertical and one horizontal" development strategy, with VD3 products as the core, extends vertically to the pharmaceutical field (one vertical), and carries out horizontal expansion of vitamin products (horizontal) to promote the rapid growth of the company.

The "one column" strategy has the advantage of raw materials, and the ossified alcohol drug project will greatly increase the company's performance. The company is one of only two companies in the world that can mass produce 25-hydroxy VD3, and the fractionation extraction process is cheaper than that of peer fermentation. On the basis of 25-hydroxy VD3, the company promotes the industrialization of fully active VD3 and further extends the downstream ossified alcohol API and preparations with a clear strategy and significant integration advantages. In addition, the company installed Garden Pharmaceutical, a subsidiary of the parent company, into a listed company in 2021 to provide a license and channel basis for the development of pharmaceutical products. The construction period of the ossification alcohol API and preparation project is 48 months. When the project reaches production, the feasibility report estimates that the average annual income is 1.89 billion yuan and the average annual profit is 1.25 billion yuan.

With the implementation of the "Yi Heng" strategy, the company has a significant cost advantage in striding forward to the general VD3 basic plate of a comprehensive large health nutrition company. on this basis, the horizontal layout of 6000 tons of VA, 20, 000 tons of VE powder, 5000 tons of VB6, 200 tons of biotin and other projects to promote the development of the company from a single variety of vitamin production to a comprehensive large-scale health nutrition company with multi-variety vitamin production.

Earnings forecast, valuation and rating

We maintain our previous profit forecast and expect the company's net profit for 2022-24 to be 5.10,6.45 and 797 million yuan respectively, with a corresponding growth rate of 6.30%, 26.42% and 23.65% respectively. The current share price is 16.2 PE 12.8pm 10.4 times. In view of the fact that the company's fully active VD3 drugs have entered the industrialization stage, the growth space is further opened, and the valuation is expected to be further improved. According to the PE law, the target price will be raised from 18 times to 25 times in 2022, and the target price will be raised from 16.74 yuan to 23.25 yuan, maintaining the "buy" rating.

Risk hint

The production or market promotion of ossified alcohols is not as expected, and the market promotion of 25-hydroxy VD3 is not as expected.