Vitamin segmentation leader, VB2 production capacity 4,800 tons
The company's main products are two B-group vitamins VB2 and VB6. Among them, VB2 has a production capacity of 4,800 tons, accounting for about 50% of the world's total production capacity. Daikin Industrial Park mainly produces VB2 for food and medicine, the Mengzhou base mainly produces VB2 for feed. After Daikin Industrial Park obtained the GMP certificate, VB2 production capacity was gradually released. Huisheng Pharmaceutical's VB6 production capacity is 1,000 tons, ranking high in the industry. It is expected to resume production in June this year, and the loss is about to reverse
Prices of VB2 and VB6 products remain high, and prices of raw materials remain low, fully enjoying the benefits of product price increases
At present, domestic market prices for VB2 and VB6 are still above 400 yuan/kg, and prices have remained above 400 yuan/kg in 6 consecutive markets, up more than 1 times from June last year. International exports of VB2 accounted for about 65%, and international export prices also soared to 49 US dollars/kg in the first quarter; on the other hand, there is an excess domestic market for corn raw materials used for VB2 fermentation, and the price of VB6 upstream petrochemical raw materials (petroleum) is basically stable. There is no risk that sharp increases in raw materials will eat away profits, and the company has fully enjoyed the benefits of product price increases.
Measuring the elasticity of product price increases on the company's performance: VB2's performance is extremely elastic
We estimate that every 50 yuan/kg increase in VB2 increases the company's earnings per share by 0.52 yuan, and every 50 yuan/kg increase of VB6 increases the company's earnings per share by 0.06 yuan. The company's performance is more sensitive to the rise and fall of the price of VB2. Currently, the domestic market price of VB2 is 405 yuan/kg, and the market price of VB6 is 470 yuan/kg. Assuming that the comprehensive sales price of VB2 is maintained at 330 yuan/kg throughout the year (domestic market price is 400 yuan/kg, export unit price is 45 US dollars/kg), the domestic market price of VB6 is 450 yuan/kg, which will increase EPS by about 2.2 yuan.
The vitamin industry is weakening cyclically, and keeping prices high will be the new normal
In recent years, China's environmental protection policy has been unprecedentedly strict, and central environmental protection inspections have been normalized. Beginning in 2016, the Central Committee initiated the organization of the first four batches of national environmental protection inspections, and vitamin APIs ushered in a cycle of widespread price increases throughout the industry. Under heavy environmental protection, compounded by the impact of some monopolistic oligopoly production accidents, the suspension of production or withdrawal of production capacity can no longer be effectively recovered at high product prices. The vitamin industry is weakening cyclically, and maintaining high prices will be the new normal.
Profit Forecasts and Investment Ratings
We forecast the company's revenue for 2018-2020 to be 1,375/12.80/1,297 billion yuan, an increase of 71.6%/-6.9%/1.4%, respectively; the net profit of the mother was 493/4.35/456 million yuan, an increase of 368.6%/-11.7%/4.9%, respectively, corresponding to earnings per share of 1.96/1.73/1.81 yuan.
According to Wind's consistent profit expectations, vitamin APIs are 11.0 times that of the company's Xinhecheng PE (2018E), 13.0 times that of Zhejiang Pharmaceutical PE (2018E), 19.5 times that of Huayuan Bio PE (2018E), and 13.3 times that of Jindawei PE (2018E). The company's current stock price corresponds to the 2018 profit forecast. The PE (2018E) valuation level is only 7-8 times that of PE, which is seriously underestimated. It is conservatively given 12 times PE in 2018, corresponding to a target price of 23.52 yuan, corresponding to a 50% increase in the current price. It is highly recommended and given a “buy” rating.