Event: on May 25, the company issued a "notice on Project Investment by holding subsidiaries". According to the needs of production, operation and business development, Shiwei Science and Technology, the holding subsidiary of the company, plans to invest in the construction of a plant extract production base project with its own funds, with a total investment of 400 million yuan, with a total construction cycle plan of five years and three phases of construction. The first phase is expected to invest 100 million yuan, with a construction period of 1.5 years. The first phase of the project is mainly used for the production of natural antioxidant rosemary extract, food and beverage and functional food raw materials dandelion extract and rose eggplant extract, as well as health food and functional food to assist in regulating blood glucose and blood pressure and improving sleep. In the second and third stages, in addition to natural plant extracts, increase the research and development of formulations to assist in regulating blood sugar and blood pressure, improving sleep and health food, functional food production and sales.

The construction of Zhiti production base is conducive to expanding production capacity and strengthening the layout of the company's big health business. This project plans to invest in the construction of a plant extract production base for the production of natural antioxidant rosemary extract, food and beverage and functional food raw materials dandelion extract and rose eggplant extract, as well as health foods and functional foods that assist in regulating blood sugar and blood pressure and improving sleep. After the project is put into production, the production capacity of the company's plant extracts can be further expanded, the transformation of R & D achievements can be accelerated, and the application fields of existing plant extract products can be expanded, including sleep-aiding, antidepressant, improving immunity, prevention and treatment of cardio-cerebrovascular and other chronic diseases, strengthen the company's big health business layout, and enhance the market competitiveness of the company's plant extract products.

Sell biomedical business assets, focusing on biological enzyme preparation, animal nutrition and health two main industries.

In March 2022, the shareholders' meeting of the company deliberated and passed a proposal on major asset restructuring, proposing to sell all the assets related to the biomedical business, that is, all the shares held by Xinhexin, Keyixin and Lihua Pharmaceutical, and the transfer of the underlying assets has been completed in April. After stripping off the biomedical business sector, the company will persist in focusing on the biological industry, based on the big health field, and guided by customer value, and apply modern biotechnology to research and develop all kinds of new biological products. Focus on the two main industries of biological enzymes, animal nutrition and health, and use the capital obtained after restructuring to increase investment in the main industry and industrial upgrading to further strengthen and expand the company's main business. 1) in terms of biological enzyme preparation, the company has become the main supplier of feed enzyme preparation in China, and has expanded from feed enzyme to energy enzyme, food enzyme, papermaking enzyme, textile enzyme, environmental protection enzyme and so on. In 2021, the company's bioenergy enzyme preparation sector achieved revenue of 646 million yuan, an increase of 16.19% over the same period last year. 2) in terms of functional feed additives, the company relies on the advantages of agricultural and animal husbandry customers' channels accumulated in the past 30 years, including anti-feed additives, antioxidants, food attractants, flavors, anti-mildew agents, vitamins and other products. The company's Cornus officinalis extract (veterinary drug raw material) and Boluohui powder (veterinary drug preparation), Bopp total alkaloid (veterinary drug raw material) and Bopp total alkaloid powder (veterinary drug preparation) have all obtained the national new veterinary drug certificate. In 2021, the company's feed additive sector achieved revenue of 227 million yuan, an increase of 14.67% over the same period last year.

Share buyback plans to implement employee stock ownership plans or equity incentives to demonstrate confidence in future development. On May 18, the company issued an announcement on the share repurchase plan of the company, with the proposed repurchase amount of not less than RMB 100 million and no more than RMB 200 million, and the repurchase price ceiling of RMB 12.40 per share (after adjustment). The estimated number of repurchase shares is 8.06 million-16.13 million shares, accounting for 1.65% of the company's current total share capital 3.29%. This share buyback will all be used for employee stock ownership plans or equity incentives, which will help to further improve the company's long-term incentive mechanism, fully mobilize the enthusiasm of the company's core backbone and excellent employees, and jointly promote the long-term development of the company.

Investment suggestion: after stripping the biomedical business assets, the company will focus on the biological industry, based on the big health field, increase investment in the main industry and industrial upgrading, and make use of the core competitive advantages accumulated by the company in the fields of biological enzymes, biological agriculture and animal husbandry over the past 30 years, such as talents, technologies, channels, customers, brands, etc., to develop all kinds of new biological products, focusing on the two main industries of biological enzyme preparation, animal nutrition and health. The implementation of equity incentives for share buybacks demonstrates confidence in future development. Without considering the investment income from the sale of biomedical assets this year, the company's EPS is expected to be 0.27,0.37,0.49 yuan in 2022-2024, corresponding to 34 times, 25 times and 19 times of PE respectively, maintaining the "overweight" rating.

Risk hints: macroeconomic fluctuations, regulatory policy changes, intensified competition in the industry, upstream cost fluctuations, uncertainty in the progress and profitability of project development, and R & D risks.