The company released its quarterly report for the first quarter of 2020, with operating income of 287 million yuan, down 3.79% from the same period last year, and net profit of 32.23 million yuan, down 13.02% from the same period last year.
Analysis.
Affected by the epidemic in the short term, profits have declined slightly, and it is expected to recover gradually in the later stage. In the first quarter, affected by the domestic epidemic, the domestic catering industry returned to work slowly after the holiday, the downstream demand for food additives such as Iyogg was blocked, product sales pressure declined, product prices fell year on year, and the company's food additive business dropped nearly 10% year on year. With the gradual resumption of work in the domestic catering industry, product inventory is gradually digested, and product prices remain stable or will improve slightly. Affected by the epidemic, the company's management costs increased, depressing the overall level of profitability, as the company starts to return to normal, profits are expected to gradually recover.
Food additive business continues to strengthen, with the two-line development of the pharmaceutical sector. The company is the earliest enterprise in China to lay out its products. It is one of the three major suppliers in China and has a long-term market foundation. With the good foundation of iDiagg, the company has continuously deepened its special product cooperation with Nestl é. Since the pilot agreement was signed in 2014, the strategic cooperation agreement was signed in 2016, the production capacity of corn fermentation production line was gradually released in 2018, and the natural green and healthy compound condiment (NC products) was expanded in 2019. After years of development, the company is expected to gradually build a dual-product support pattern of food additives. At the same time, based on its own pharmaceutical business, the company will cooperate with Jiuling Pharmaceutical to strengthen the pharmaceutical layout, which is expected to drive the company's long-term development.
We will continue to promote the construction of the three major bases and build a pattern of coordinated regional development. In 2019, the company successively laid out and planned the Zhaodong biological fermentation industrial base (investing 680 million yuan to build a 10,000-ton nucleotide product production line) and Huaiji green health industrial base (investing 345 million yuan to build 5000 tons of NC products, 300t / year inosine, 900t / year proline and 150t / year ribavirin). Through the construction of the two bases, combined with the Sichuan Jiuling Pharmaceutical subsidiary acquired by the company. The company will realize the coordinated industrial layout of South China, Southwest and Northeast China. The company divides the production line of the existing base into two-way, making use of the price advantage of northeast corn and coal to reduce the production cost of nucleotide products, while upgrading and reforming the pharmaceutical health products in the new base, while expanding the production capacity of natural green health compound condiment (NC products), optimize the production process of the original products and improve the production efficiency of the products.
Investment suggestion
The company's pharmaceutical sector benefits from industry pattern optimization and capacity release, and continues to achieve rapid growth. NC products in cooperation with Nestl é are expected to drive the company's long-term growth, but taking into account the continuing overseas epidemic situation, it is forecast that EPS in 2020-2022 will be 0.20,0.24,0.28 yuan, maintaining a "buy" rating.
Risk hint
The production and sales of food additives and other products are affected by the epidemic; the relocation of the base affects the production and sales of products in the short term.