Andisu released its 2022 annual report. In 2022, the company achieved revenue of 14.529 billion yuan, an increase of 12.90% over the previous year; the net profit returned to the mother was 1,247 billion yuan, a decrease of 15.29% over the previous year.

Revenue growth in 2022 was mainly due to the successful commissioning of the second phase of the Nanjing Liquid Methionine Plant project and continued growth in the specialty products business. The decline in profit was mainly affected by rising raw material prices and energy prices. 1) By product revenue, the 2022 revenue of functional products, specialty products, and other products increased 14%, 5%, and 38% to 103.37, 33.22, and 870 million yuan respectively; 2) By product gross margin, the gross margin of functional products, special products, and other products decreased 7, 2, and 15 percentage points year-on-year to 23%, 47%, 5%, respectively; 3) Sales, management (including R&D), and financial expense ratios changed year-on-year in 2022 -1.29pct, -0.19pct, 1.04 pct to 8.01%, 4.82%, and 1.17%, and the total cost rate for the three items decreased by 0.44 pct to 14.00%.

The company's newly launched production capacity is rich, enhancing its competitive strength and leading position in the market. 1) In terms of methionine business, on September 15, 2022, the Nanjing Liquid Methionine Plant Phase II Project (BANC2), which added 180,000 tons of production capacity, successfully drove and climbed smoothly. By the end of 2022, the total production capacity of the Nanjing production platform had reached 350,000 tons, making it one of the largest and most cost-competitive liquid methionine production platforms in the world. 2) Kaidisu, a joint venture established by Andisu and Keller's, developed innovative Fercon protein for the aquaculture industry in China and Southeast Asia, prompting Andisu to enter a new field of alternative proteins with great potential for development. Kaidisu's Chongqing plant is the world's first large-scale production unit project for Fitcon's innovative protein products. Project construction was completed before the end of 2022.

Innovative products and external mergers and acquisitions support continued high growth in the specialty products sector. The company actively explores innovative products and develops specialty products business as the second pillar of the company.

Andisu announced the signing of the acquisition of Nor-Feed in December 2022 to accelerate the implementation of its specialty product growth strategy. In particular, it plays an important role in promoting the adoption of unique and differentiated technology to provide solutions in an economically safe and sustainable manner. The acquisition was completed on February 23, 2023, and the synergies brought about by this new product line will gradually become apparent in 2023 and beyond. The integrated NUDI and FramelCo complement the company in all aspects such as product portfolio, animal categories, and target markets, and synergies in markets, products, and operations have developed along with them.

Profit forecasts and investment ratings. Due to the decline in methionine prices, we lowered the company's performance. We expect the company's EPS to be 0.56 (-22%), 0.62 (-18%), and 0.69 yuan (new) in 2023-2025, respectively. Referring to the valuations of comparable companies in the same industry, we gave 19 times PE for 2023, and the corresponding target price was 10.64 yuan (the previous target price was 12.60 yuan, based on 21 times PE in '21, -16%), maintaining the “superior market” rating.

Risk warning. The progress of production capacity under construction fell short of expectations. Prices of products such as methionine and vitamins fluctuated, and prices of raw materials fluctuated.