Yiduoli announced results for the first half of 2020: operating income of 918 million yuan, YoY +7.3%, net profit of 70 million yuan, YoY +77.6%, corresponding EPS of 0.16 yuan, in line with expectations.
Yiduoli's “anti-antibody” business is expected to usher in relatively rapid growth. Restricting resistance and banning resistance is an inevitable choice for the green development of the aquaculture industry and ensuring food safety. On July 1, 2020, China's feed manufacturers began a complete ban on resistance.
Based on overseas experience, we believe that the potential market space for alternative products exceeds 10 billion yuan. In response to the anti-resistance policy, Yiduoli laid out ahead of schedule. Existing bioenzyme products, glucose oxidase and complex enzymes, plant extract products, and glyceryl tributyrate, and acidifier product tributyrate glyceride have been tested in multiple batches, and an effective anti-feed additive solution has been formed. 2020H achieved revenue of 63.96 million yuan for anti-feed additives, an increase of 45.03% over the previous year. Combining the company's marketing channel advantages and brand advantages in agriculture and animal husbandry over the years, the company's anti-resistance products have now entered the market cultivation and trial stage. We expect that starting in the second half of this year, the company's “alternative” business will usher in significant performance growth.
The release of new production capacity in the pharmaceutical raw materials business is imminent, and development will accelerate in the future. The company successively acquired Xinhe and Lihua Pharmaceutical in 2015, extended medical enzyme preparations to the downstream pharmaceutical industry, and opened up the steroidal pharmaceutical manufacturing industry chain. The company's related products include glucocorticoid APIs and sex hormone APIs.
According to several versions of the “Novel Coronavirus Pneumonia Diagnosis and Treatment Bill” jointly issued by the National Health Commission and the State Administration of Traditional Chinese Medicine, glucocorticoids can be used as treatment for severe cases, and the performance of the company's related glucocorticoid API products increased significantly in 2020H. The company's new sex hormone API project is expected to be put into operation within the year, contributing new profit growth points.
There is an opportunity for import substitution in the bioenzyme preparation business. The company's non-feed enzyme preparation business is developing rapidly. The food-grade bioenzyme preparation project has been completed and put into operation, other new bioenzyme preparation projects will be gradually put into operation in the future, and the company's non-feed enzyme preparation products are expected to gradually be imported and replaced in the future.
Company profit forecast and investment rating: We maintain our profit forecast for the company, that is, the company's net profit from 2020 to 2022 is 207 million, 2.63 million yuan, and 334 million yuan respectively, corresponding to EPS of 0.44, 0.55 and 0.71 yuan, respectively. The current stock price is 33, 26, and 21 times the P/E value corresponding to 2020 to 2022, respectively. Maintain the “Highly Recommended” rating.
Risk warning: the release of downstream demand falls short of expectations; investment of additional production capacity falls short of expectations; risk of impairment of goodwill.