Core viewpoints
Event: recently, the company released the 2022 interim report, realizing operating income of 800 million yuan (+ 50.31%), net profit of 297 million yuan (- 6.99%), and deducting non-net profit of 260 million yuan (+ 80.03%).
Garden Pharmaceutical's high revenue growth, sales expense growth affects the net interest rate: the company's revenue and deduction of non-net profit increased significantly, mainly due to the company's acquisition last year Garden Pharmaceutical revenue increased by 253 million yuan compared with the same period last year, while due to disclosure requirements, Garden Pharmaceutical's net profit of 84 million yuan in the same period last year was fully included in non-profit and loss. If excluding this effect, deducting non-net profit increased by 13.91% over the same period last year. The slight decline in the growth rate of net profit is mainly due to the increase in marketing expenses of Garden Pharmaceutical Co., Ltd., which caused the sales expense rate to rise to 21.23%, and the relocation income of Hangzhou Xiashazi Company decreased by 75 million yuan compared with the same period last year.
The price of VD3 has entered the bottom range, and the cost advantage is obviously stable: the revenue of the company's VD3 and D3 analogues business in the first half of the year decreased by 10.13% compared with the same period last year, and the gross profit margin fell 4.97pct compared with the same period last year, mainly due to the low profit level of domestic farming in the first half of the year. Feed consumption was low; and in the fourth quarter of 2021, exports were overbought, overseas customers mainly digested inventory, and feed-grade VD3 prices fell into the bottom range. As the only manufacturer of the whole VD3 industry chain in the world, the company supports the world's largest core raw material NF cholesterol production capacity, with obvious cost advantages and stable profits. although the gross profit margin has declined, it still reaches 60.83%.
Join hands with the giants to share the upgrading of the industrial chain, "one vertical and one horizontal" opens the room for growth: the company is the only two manufacturers in the world that can produce 25-hydroxyl VD3 on a large scale. The company has the advantages of simple production process, high yield and low cost, and signed a ten-year long order with DSM. As DSM promotes the replacement of VD3 with 25-hydroxy VD3 in feed additives, the increase in permeability and the gradual release of Jinxi Science and Technology Park capacity, the company's performance is expected to grow rapidly. The company implements the new development strategy of "one vertical and one horizontal", broadens the layout of vitamin field horizontally, and longitudinally promotes the industrialization of fully active VD3 project, which will open up the growth space for the company.
Profit forecast and valuation: we expect the company's net profit from 2022 to 2024 to be 5.24,6.96 and 880 million yuan, an increase of 9.21%, 32.84% and 26.40% over the same period last year, corresponding to a PE of 19.81,14.91 and 11.80 times respectively.
Risk hints: capacity release is not as expected; 25-hydroxy VD3 promotion is not as expected; industry competition aggravates risks; macroeconomic downside risks.
