Event: according to Boya and News, as of 2020.2.26, the domestic biotin market quoted price of 325 yuan / kg, up 86% from the beginning of the month, a large short-term increase.
The current cycle of biotin price increases begins with 2019Q4: global biotin production is concentrated in China and is highly concentrated. The main enterprises are Shengda Biology (30% of nominal production capacity), Xinhecheng (23%), Zhejiang Medicine (19%), Haijiano (9%), Anhui Tiger (9%) and Sinovac Biotech (9%).
According to Boya and News, the price of domestic biotin entered a long inventory cycle from May 2018 to October 2019, and the price was maintained in the bottom range of 50-60 yuan / kg. With Tiger halting production due to patent lawsuits and opening Zhejiang Pharmaceutical and Haijiano biotin plants due to environmental regulations in northern Jiangsu, there is a supply shortage that accounts for 38 per cent of domestic nominal production capacity. Since then, as the inventory elimination has come to an end, the company, as the industry leader, took the initiative to raise prices in November 2019, driving the biotin industry to start a new rising cycle. as of the Spring Festival, the price of domestic biotin (2%) has reached 175 yuan / kg.
Recently, the supply and demand of the industry is further tightened, and the rising trend of products is expected to continue: 1) from the supply side:
Affected by the epidemic, the resumption of work at Haijiano and Zhejiang Pharmaceutical Biotin plants continued to be delayed, and the production capacity of Shengda and Xinhe Cheng was also affected by the delay. In addition, the epidemic also affected the normal start-up of Rongtai Pharmaceutical, the main supplier of potassium thioacetate, an important intermediate of biotin in Huanggang, Hubei Province, thus affecting the supply of biotin. 2) from the point of view of demand: "ensuring that pig production capacity basically returns to the normal year level by the end of 2020" has been listed in the No. 1 document of the Central Committee of 2020. The warming of breeding feed this year is expected to lead to a marginal increase in biotin demand, and according to the data of the Ministry of Agriculture, the stock of breeding sows increased by 1.2% in January this year, which has achieved month-on-month growth for four consecutive months. We believe that the price of biotin is expected to continue to rise under the background of further tightening of supply and demand in the industry because the addition of biotin in feed is very small and the downstream is not sensitive to product price increases.
Biotin price rise corresponds to the company's profit elasticity calculation: the company has a biotin (pure product) production capacity of 160t, according to the annual sales of 100t pure product, biotin (2%) including tax price increases by 10 yuan / kg, the company's profit increases by 38 million yuan.
We expect the company's results in 2019-2021 to be 0.7 million, 2.8 billion, 2.9 million, respectively, corresponding to PE, which is multiple of 98-24-23, giving the "overweight" rating for the first time.
Risk tips: product prices rise less than expected, environmental protection, safety and other production risks.