What happened: the company released its semi-annual report for 2020. In the first half of 2020, the company achieved a total operating income of 848 million yuan, + 1.77% compared with the same period last year, and a net profit of 95 million yuan,-9.55% compared with the same period last year. The performance fell short of industry expectations.
Comments:
The sales of additives declined in the first half of the year, and the performance of vaccines and chemicals increased greatly compared with the same period last year. The company is mainly engaged in veterinary drug additives. In the first half of the year, in the face of the adverse impact of the sudden COVID-19 epidemic and the new adjustment of the veterinary drug regulatory policy of the Ministry of Agriculture and Village, the company's performance fell short of industry expectations. From a quarterly point of view, Q1 and Q2 achieved revenue of 433 million yuan and 415 million yuan respectively, which was + 12.58% and-7.50% respectively compared with the same period last year.
① drug feed additive business: sales in both domestic and foreign markets have declined to varying degrees, with revenue of 437 million yuan in the first half of the year,-13.64% compared with the same period last year. ② Veterinary Vaccine Business: after resource integration and technology upgrading in recent years, the market expansion of Veterinary Vaccine Business has achieved initial results. The market sales of pig blue ear and pig ring vaccine are good. Revenue in the first half of the year reached 89 million yuan, + 152.97% compared with the same period last year. ③ veterinary chemicals business: domestic pig stock and output have rebounded, and the demand for veterinary drugs in the breeding industry has increased. Revenue in the first half of the year reached 23 million yuan, + 95.71% compared with the same period last year. ④ agricultural products processing business: the demand for corn starch and liquid sugar in the downstream market has decreased, and the sales volume of corn starch and liquid sugar has declined, but the price of protein powder has rebounded, and the prices of starch and associated products are generally higher than those of the same period last year. Revenue in the first half of the year reached 232 million yuan, + 7.30% compared with the same period last year.
The decline in gross profit margin of main feed additives leads to a decline in overall gross profit margin. In the first half of the year, the company achieved a gross profit margin of 37.56%, a decrease of 3.62% over the same period last year; a net profit rate of 12.63%, a decrease of 0.03% over the same period last year; and an expense rate of 22.82%, down 2.57% from the same period last year. The decline in gross profit margin was due to a decrease of 8.43 percentage points in the gross profit margin of the main drug feed additives compared with the same period last year.
With the rapid mending of live pigs, sales of veterinary products are expected to rise. After African classical swine fever, the pig industry quickly replenished the stock. according to the data of the Ministry of Agriculture and Village, at the end of June, the country was able to breed 36.29 million sows, and the recovery progress in the first half of the year was good; the stock of live pigs reached 340 million, and the second half of the year is expected to usher in a period of intensive production. Make up the column to increase the demand for feed and increase the demand for veterinary drug additives at the same time. The stock of live pigs has increased, and the sales of veterinary vaccines and veterinary chemicals are expected to follow.
Investment suggestion: under the general situation, the demand for feed and veterinary vaccine increases, and the company's main business corresponds to the market demand, which is expected to continue to benefit. We estimate that the company's earnings per share in 2020 and 2021 will be 0.38 and 0.48 yuan respectively, and the current share price will be 21.26max 16.75 times PE, maintaining the company's "recommended" rating.
Risk tips: the fill column is not as expected, the additive policy changes, vaccine sales are not as expected, and so on.
