Event: The company released its semi-annual report for 2023. Revenue for the first half of the year was 544 million yuan, +2.13% year on year, net profit of 31 million yuan, -15.87% year on year; of these, Q2 revenue was 311 million yuan, +12.56% year on year, +33.9% month on month, net profit of 21 million yuan, +8.2% year on year, and +97.93% month on month. The company's performance for the first half of the year was in line with market expectations.
The company's three main business revenue increased slightly in the first half of the year: among them, enzyme preparations +1.03%; animal health care +4.48%; and microecological preparations +5.46%. The company's gross profit margin for the first half of the year was 44.18%, a slight increase of 1.02 pct over the previous year.
The company invested 51 million yuan in R&D in the first half of the year, accounting for 9.45% of revenue, and is at a high level in the industry.
In August of this year, the company acquired 51% of Runbote Biotechnology Co., Ltd.'s shares with its own capital of 91.8 million yuan. Runbote has a rich heritage in antibiotic substitution, especially tannic acid research. It complements the company's enzymes, probiotics, and Chinese herbal medicines to form a complete system of antibiotic substitution, effectively improving the animal health system of Blue Biology.
Aiming at the huge prospects of the Chinese probiotic market, the company strives to become a leading probiotic R&D and manufacturer with strong R&D capabilities and a complete business system. In May 2022, Weifang Weizhilan, a wholly-owned subsidiary of the company, introduced the world's top 500 ADM through capital increases to establish EDM Weilan Biotechnology (Shandong) Co., Ltd., with a total investment of about 400 million yuan. The new plant will have a production capacity of 100 tons of functional probiotic powder raw materials and 100 tons of probiotic liquid products. Construction of the civil engineering section is expected to begin by the end of September 2023. The factory is expected to be officially put into production and operation in early 2025. The company's capabilities in terms of probiotic brands, production capacity, market share, channels, etc. will also be built and operated After It has been further improved.
At present, the Blue Biotechnology Center and the Plant Microecological Formulation Project have been successfully put into operation, and the Animal Protection Industrial Park is gradually being put into production and operation. The Weifang Kangdien Refining Enzyme series product production line construction project is being successfully prepared and is expected to be put into production and operation in May 2024. The systematic production capacity layout of the company's major business segments has basically been completed. The company's strength in terms of products, production capacity, market share, and channels will also be further enhanced after the new production capacity is put into operation.
Investment advice: Maintain a “buy” rating. Based on the above analysis, it is estimated that the company's operating income for 2023/2024/2025 will be 1,281/14.19/1,582 billion yuan respectively (2023-2024 year old value was 1,23/1,390 million yuan), net return profit was 123/1.43/160 million yuan (value before 2023-2024 was 128/155 million yuan), EPS was 0.49/0.57/0.63 yuan respectively, and the current stock price corresponding to PE 27.6/23.7/21.2 times. Maintain a “buy” rating.
Risk warning: Risk of R&D results falling short of expectations; marketing and sales risks; downstream aquaculture industry cycle and risk of sudden outbreaks; risk of fluctuations in raw material prices; there may be risks of information being delayed or not updated in a timely manner in the public information used in research reports.