It is proposed to extend the biological method of succinic acid, PDO and rose essential oil, maintain the "increase" rating company issued a notice on September 12, and intend to sign a "technical license contract" with Oneco to obtain a 20-year exclusive license for the production of succinic acid by fermentation, so as to promote the industrialization of succinic acid by fermentation. At the same time, it is proposed to increase capital to Zhihe (get 25% equity and actually have 100% voting rights) to promote the industrialization of 1pyr3-propanediol (PDO) and rose essential oil. We are optimistic that the company's synthetic biotechnology can enable PDO, succinic acid and other products to make breakthroughs in biological production. With the decrease in the cost of small molecular diols and dicarboxylic acid, the downstream application is expanded rapidly, and the demand is expected to expand nonlinearly. We maintain the company's 22-24 EPS forecast of 2.44 shock 4.76 yuan, combined with the comparable company's 22-year Wind consensus expected average 51xPE valuation. Considering the growth of the company's new projects and the application potential of synthetic biology, the company is given a 22-year 62xPE with a target price of 151.28 yuan (the previous value is 143.96 yuan, based on 22-year 59xPE), maintaining the "over-holding" rating.

PDO: broad prospects for downstream application, synthetic biological energy industry cost reduction and mass production breakthrough PDO can be used in the production of polyol polyester and carbon chain extender, 20 years global scale of about 400 million US dollars, the downstream product PTT is expected to partially replace PET/PBT and other traditional polyester, broad prospects, and PDO technology, mass production capacity and cost are the key links of PDO/PTT market expansion. The traditional chemical method PDO withdrew gradually because of the harsh reaction, and the biological PDO method of glucose / glycerol pathway has become the mainstream, and the cost of sugar method is significantly better than that of glycerol method. When we estimate that the glucose pathway produces PDO and produces PTT, the cost of PTT has been able to compete with PBT/PA6. The company plans to increase investment in Zhihe and has 100% voting rights, actually control Zhihe and promote the industrialization of PDO and rose essential oils, relying on the experience of existing strain iteration and process magnification, is expected to help PDO continue to reduce costs, and the product line will continue to be rich.

Succinic acid: C4 platform compound. Succinic acid is an important intermediate product of biological TCA cycle when biological method is spring. it can be used as the precursor of many kinds of compounds such as BDO/PBS/THF/ γ-succinolactone. The market potential is more than 2.7 million tons per year. Limited by technology and cost and other factors, the global production capacity of succinic acid is only 115000 tons in 21 years, and there is great potential for future development. In particular, downstream PBS ushered in the golden development opportunity as a biodegradable variety. Under the good demand prospect, the distribution of succinic acid by chemical method is also accelerated, but the competitiveness of biological method is excellent based on environmental protection and low price of raw materials. We estimate that the cost of synthesizing PBS from glucose can compete with that of PBAT/PLA. The company plans to sign a "technology license contract" with Euro Bio to obtain an exclusive license for the production of succinic acid by fermentation for 20 years, which is expected to help open the ceiling of the industrial application of succinic acid and contribute new profit growth points for the company.

R & D-driven growth, new technologies and new projects continue to consolidate growth, in addition to PDO, succinic acid, the company's projects under construction include alternating production of 25000 tons of alanine / valine, annual production of 16000 tons of three-branched chain amino acids and derivatives, β-alanine derivatives and so on. The company continues to strengthen industry-university-research cooperation and introduce high-end managers and R & D talents. According to the half-yearly report, 22H1 R & D personnel increased by 52 to 133 over the same period last year. Relying on technology and product innovation, the company will continue to expand the blue ocean of synthetic biology in the future.

Risk hint: the risk that the progress of the new project is not as expected; the risk of core technology loss.