Main points of investment
The company's public 2022H1 operating performance: in the first half of 2022, the company recorded operating income of 12.93 billion yuan, an increase of 35.8% over the same period last year, of which food additive business revenue increased by 34.9% to 6.07 billion yuan, accounting for 46.9% of the company's overall operating income, down 0.3pct from the same period last year. The income of animal nutrition business increased by 37.3% to 4.75 billion yuan compared with the same period last year, accounting for 36.8% of the company's overall operating income, and increased 0.4pct compared with the same period last year. The company achieved a gross profit of 3.58 billion yuan in the first half of the year, an increase of 102.8% over the same period last year, and a net profit of 2.03 billion yuan, an increase of 242.8% over the same period last year.
Gross profit margin led to a sharp increase in profitability: in the first half of 2022, the price rise led to a year-on-year increase in gross profit margin of 9.2pcts to 27.7%, of which gross profit margin for food additives increased by 7.5pcts to 20.9%, gross profit margin for animal nutrition products increased by 11.4pcts to 29.4%, and colloidal gross margin increased by 12.5pcts to 50.6%. During the period, due to rising transportation costs, the company's sales expense rate rose by 0.4pct to 6.7% year-on-year, while the management expense rate decreased by 0.4pct to 3.7% year-on-year. The company's parent net interest rate increased by 9.4pcts to 15.7% compared with the same period last year.
Our point of view: Fufeng Group is an international biological fermentation products company, mainly committed to the research, development, production and management of various amino acids and their derivatives and biological colloids. It is the world's largest producer of monosodium glutamate and the world's largest producer of xanthan gum. The company's Qingdao Scientific Research Center began operation in May 2022 to further enhance the company's systematic R & D and technical capabilities. The company will further strengthen the B2C model and provide exclusive product solutions for industrial customers. While continuing to implement the internationalization plan, the company has bought land in North Dakota to build an animal nutrition factory. The company completed the acquisition of a third-party company in northeast China and transformed it into an internal chemical factory to reduce production costs. As of August 31, 2022, the company's shares were trading at 3.5 times PE (TTM).
Risk hints: more-than-expected fierce market competition; significant higher-than-expected fluctuations in raw material costs; risk of product price decline