The company is a manufacturing enterprise with biological fermentation and biochemical technology as the core technology. at present, the company's leading products are food additives, chemical raw materials and pharmaceutical intermediates. In 2018, the company achieved an operating income of 859 million yuan, an increase of 25.06% over the same period last year, and a net profit of 42 million yuan, an increase of 126.71% over the same period last year. Among them, nucleotide additives and nucleosides and nucleotide raw materials and intermediates accounted for 71% and 20% respectively, contributing to the main source of income.
The demand for food additives remained stable and the price of nucleotides continued to rise. According to the data of China Industry Information Network, the output of food additives in China has increased steadily since 2011. by 2017, the output of the whole industry was 10.32 million tons, an increase of 35.79 percent over 7.6 million tons in 2011, with an average annual growth rate of 5.23 percent. The company's main product, nucleotide disodium, is a new generation of nucleotide food fresheners. According to Zhuochuang information, the average price of 1H2019 products is 104,800 yuan / ton, up 16% from 907,000 yuan / ton in the same period last year, and the average price difference is 902,000 yuan / ton, up 18% from 762,000 yuan / ton in the same period last year.
The environmental protection policy of chemical API industry is stricter, and the degree of concentration is expected to be improved. According to WIND data, 1H2019's domestic sales of chemical raw materials are 1.6061 million tons, up 11.96 percent from the 1.4344 million tons of 1H2018. Since 2016, the API industry has tightened environmental protection policies, environmental law enforcement has been unprecedented, small and medium-sized production capacity have stopped production and withdrawn from the market, supply has shrunk, and industry concentration has been further enhanced.
Invest 680 million yuan to build the first phase of Zhaodong Biological fermentation Industrial Park. The company announced on June 29, 2019 that it intends to invest no more than 680 million yuan to build the first phase of Zhaodong Biological fermentation Industrial Park. The project plans to build a production line of 10,000-ton nucleotide products with a construction period of 12 months. We believe that after the completion of the project, we will further optimize the industrial layout and products, become the production base of the company's biological large-scale fermentation products and highly resource-dependent products, and improve the company's leading position and core competitiveness in the industry.
With the acquisition of Jiuling Pharmaceutical, pharmaceutical intermediate products are further enriched. The company announced the purchase of 100% equity interest in Jiuling Pharmaceutical at a price of 394 million yuan, and the net profits attributed to the parent company after deducting non-recurring profits and losses from 2017 to 2020 were not less than 3020 yuan, 3200 yuan, 3790 yuan and 43.5 million yuan respectively. Jiuling Pharmaceutical is a pharmaceutical and chemical enterprise engaged in the research, development, production and sales of pharmaceutical intermediates. We believe that through this merger, the company's range of pharmaceutical intermediates will be further enriched. the business scale of chemical API and pharmaceutical intermediates will be further enhanced to achieve vertical integration.
Profit forecast. We estimate that from 2019 to 2021, the company's EPS will be 0.23,0.25,0.27 yuan respectively. Combined with the comparable company valuation level, we give the company 25-28 times PE in 2019, corresponding to a reasonable value range of 5.75-6.44 yuan, which is better than the big market rating for the first time.
Risk tips: the price of nucleotides has fallen, the performance commitments of mergers and acquisitions are not up to standard, and the market demand for pharmaceutical raw materials has declined.