Growth accelerated in the third quarter.
Guangji Pharmaceutical released its three-quarter report, with income of 554 million yuan in the first three quarters, an increase of 47.5% over the same period last year, net profit of 125 million yuan (a loss in the same period last year) and EPS0.496 yuan, with operating cash flow per share of 0.243 yuan, in line with market expectations and within the range of performance growth announced in the previous period (1-140 million yuan). Of this total, Q3 realized 237 million yuan in revenue and 67.93 million yuan in net profit (a small profit in the same period last year), with a quarter-on-quarter growth rate of 101% (compared with 47% in the second quarter).
The increase in performance is due to the widening of product price spreads and the reduction of expense rates.
Since the beginning of this year, the price of vitamin B2, the leading product, has risen (according to the China Feed Industry Association, the average price of vitamin B2 (80%, market price) was 131 yuan / kg in the first three quarters of last year and 258 yuan / kg this year, up 97% from the same period last year. The price of raw materials such as corn fell, and the company's comprehensive gross profit margin was 47.9% in the first three quarters, a sharp increase of 21.5% over the same period last year. Q3 gross profit margin is 49.1%. On the other hand, with the increase in product prices and revenue, the expense rate during the company period decreased significantly compared with the same period last year, in which the sales expense rate decreased by 0.6pct to 3.4%, the management expense rate decreased by 6.5pct to 13.7%, and the financial expense rate decreased by 2.0pct to 5.2%, driving performance growth.
The decline in corn prices has helped the company to expand its profit margins.
Corn is the main raw material for the production of vitamin B2, accounting for about 70% of the cost. After the National Day holiday, with the concentrated listing of corn in the new season, domestic corn prices fell further. According to the National Bureau of Statistics, the latest price of secondary yellow corn fell 18.4% year on year. In the medium term, the domestic corn supply pressure still exists, which will help the company to expand its profit space. In addition, as the main raw material of feed, the decline in corn prices also helps to reduce the sensitivity of feed enterprises to vitamin price increases.
The price of vitamin B2 is expected to rise.
The peak demand season for vitamin B2 downstream is approaching, and under the background of increasing industry concentration, the mainstream enterprises represented by the company are more willing to raise prices. According to Boya and Hexun data, 80% of feed-grade product dealers quoted prices of 265-300 yuan / kg, and 98% of products quoted 360-380 yuan / kg. At the same time, there is still great uncertainty about the actual production progress of new production capacity such as Sheng Xue Dacheng, and the price of vitamin B2 has the potential to rise further.
Maintain the "overweight" rating.
We expect the company's EPS to be 0.74,1.15 yuan in 2016 and 2017 respectively, the company's performance is more flexible, and there are certain expectations of state-owned enterprise reform, combined with the secondary market increase prices of major shareholders (17.84,19.69 yuan), the current stock price has a better risk-income ratio, follow-up product prices and falling prices of raw materials such as corn are potential catalysts to maintain the "overweight" rating.
Risk hint: product price increase progress is not up to the expected risk, corn and other raw material prices fluctuate sharply.