Shareholders should account for profit of 3.861 billion yuan during the period in 2022, an increase of 201.5% over the previous year. The company achieved revenue of 27.475 billion yuan in 2022, an increase of 27.6% over the previous year; the profit attributable to shareholders of the company was 3.861 billion yuan, an increase of 201.5% over the previous year; the basic profit attributable to shareholders was 1.5234 yuan per share, an increase of 201.36% over the previous year. The high growth in the company's performance was mainly due to a sharp increase in revenue from the food additives, animal nutrition and colloids segments. The company focused on continuous transformation, profit growth, active pricing, cost management and strict capital control. The company achieved revenue of 14.544 billion yuan in 202H2, an increase of 12.47% over the previous year, an increase of 21% over the previous year; profit attributable to shareholders was 1,835 million yuan, a decrease of 9.42% over the previous month and an increase of 166.10% over the previous year.
By product: 1) Food additives segment: Achieved revenue of 13.301 billion yuan in 2022, an increase of 28% over the previous year, and a gross profit margin of 19.5%, an increase of 5.8 pct over the previous year. Among them, MSG's revenue was 10.78 billion yuan, an increase of 26.6% over the previous year, and sales volume was 1,2531 million tons, an increase of 12.92% over the previous year. 2) Animal nutrition division: In 2022, the company achieved revenue of 9.581 billion yuan, a year-on-year increase of 25.7%, a gross profit margin of 27.9%, a year-on-year increase of 9.9pct. Among them, the company's threonine achieved revenue of 2,470 million yuan, an increase of 3.1% over the previous year, sales volume of 258,800 tons, an increase of 1.78% over the previous year, and lysine achieved revenue of 2,008 billion yuan, an increase of 21.9% over the previous year. 3) Colloidal segment: Achieved revenue of 2,239 million yuan in 2022, an increase of 114.7% over the previous year, of which the revenue of xanthan gum was 2,169 billion yuan, an increase of 123.9% over the previous year.
Benefiting from rising prices of main products. According to Zhuochuang information, the average price of MSG in 2022 was 9,776 yuan/ton, an increase of 6.87% over the previous year; the price difference for MSG corn was 2,215 yuan/ton, an increase of 18.27% over the previous year; the average price of xanthan gum was 40,452 yuan/ton, an increase of 61.76% over the previous year, and the price difference of xanthan gum was 33021 yuan/ton, an increase of 85.03% over the previous year.
Implement an international strategy to continue to reduce production costs. In 2023, the company will implement the international strategy with high quality, accelerate the implementation of a more complete international production and sales network, and set up three regional marketing centers in America, Europe and Southeast Asia to directly serve overseas customers. At the same time, the company will continue to improve production technology to reduce unit production costs, improve logistics systems, further optimize logistics processes and reduce logistics costs.
Profit forecast and valuation: Due to the decline in the prices of the company's main products, we lowered our profit forecast for the company. We expect the company's net profit to parent in 2023-2025 to be 35.63 (-3%), 41.98 (-5%), and 45.90 billion (additional) billion yuan, respectively. The corresponding EPS will be 1.41, 1.66 and 1.81 yuan/share, respectively. Referring to the valuations of comparable companies and considering the difference in the valuation of AH shares, the company was given 5 times PE in 2023, corresponding to $7.05. Based on the HKD/RMB 0.87 exchange rate, the corresponding target price was HK$8.10) (the target price in the previous period was HK$7.77, based on 5.7 times PE in 2022, +4.25%) to maintain the “superior market” rating.
Risk warning: risk of a sharp rise in raw material prices, risk of falling product prices, risk of a slowdown in economic growth