Main points of investment
Event: the company issued a 2020Q1 report that its operating income was 458 million yuan, an increase of 46.97% over the same period last year; the net profit was 19.8496 million yuan, up 178.07% from the same period last year; and the net profit was 19.2314 million yuan, an increase of 157.88%.
Comments:
The price of 2020Q1 vitamin B1 superimposed major vitamins rose at the bottom and is expected to contribute excess income. Brother vitamins (VB1) is an important subsidiary of the company, accounting for nearly 40% of revenue and more than 80% of net profit in 2016-2018. The suspension of production of brother vitamins in 2019 has a great impact on the company's performance, and brother vitamins have been approved to resume production in March. Affected by the epidemic at the beginning of the year, the price of the company's main variety, VB1/VK3/VB3/VB5, increased by 35.22%, 0.56%, 33.51%, 107.34% respectively in the first quarter compared with the same period last year. Under the condition that sales maintain stability, it is expected to contribute to performance growth. The sharp increase in the price of the company's vitamin varieties mainly occurred in March, which is expected to contribute part of the revenue in the first quarter, while the price increase is expected to be fully realized in the second quarter.
During the period, the expense rate increased compared with the same period last year, and the profitability increased. Benefiting from the sharp increase in vitamin prices, the company's 2020Q1 gross profit margin and net profit margin were 31.99% and 4.33% respectively, year-on-year + 17.36pct and + 12.49pct. The rate of expenses during the period is 24.08%, which is + 0.78pct compared with the same period last year. Among them, the sales expense rate, management expense rate (including R & D) and financial expense rate are 2.52%, 19.24%, 2.33%, respectively, compared with the same period last year. The increase in the rate of management expenses is mainly due to the impact of the epidemic, and the manufacturing costs of suspension of production are included in the management expenses.
Acquire Longsheng South Africa to promote the coordinated development of the company's business. Longsheng's main products in South Africa include sodium dichromate, chromic acid, chrome tanning agent, etc., with operating income and net profit of 530 million yuan and 48.679 million yuan respectively in 2018. At present, delivery has been completed, and the delivery date is January 10, 2020. Subsidiary performance statement, thickening the company's EPS.
The company invests about 6 billion yuan in Jiangxi Jishan Industrial Park, laying out fine chemical business. (1) the project with an annual output of 20, 000 tons of hydroquinone and 31100 tons of hydroquinone derivatives, focusing on the production of spice products mainly composed of vanillin and ethyl vanillin (sales income of about 714 million yuan during the production period and average annual net profit of about 91 million yuan for ten years); (2) contrast medium raw materials and intermediates (sales income of about 970 million yuan and net profit of about 129 million yuan) (3) the construction of a project with an annual output of 30,000 tons of natural spices (sales income of 1.531 billion yuan and net profit of 206 million yuan). As the Jiangxi project is gradually put into production in 2020, it is expected to open up the company's growth space.
Profit forecast: we estimate that the realizable operating income of the company from 2020 to 2022 will be 2432.75, 2975.19 and 3334.66 million respectively, and the net profit will be 257.06, 445.89 and 503.58 million, respectively, and the corresponding PE will be times that of 18-10-9. Maintain a "buy" rating.
Risk tips: vitamin product prices decline; Jiangxi Phase II project construction and sales are not as expected.