Incident: The company recently released its semi-annual report for 2023 and the “Prompt Notice on Planning Capital Increase and Related Transactions for Shiyao Group Jushi Biopharmaceutical Co., Ltd.”
The price of caffeine was high in '22, the performance base was high, and the 23Q2 performance was under pressure. 2023H1, the company's overall revenue was 1.31 billion yuan, up 5.5% year on year, and net profit from parent was 400 million yuan, up 20.7% year on year. Among them, revenue from functional raw materials was 1.1 billion yuan, an increase of 7.3% over the previous year, and revenue from health food products was 180 million yuan, an increase of 0.15%. The sales volume of 23H1, a caffeine product, was 7762 tons. Looking at Q2 alone, revenue was 6.3 billion dollars, down 10.7% year on year, and net profit was 220 million yuan, up 5% year on year. The main reason for the pressure on performance was that the company's main business, caffeine API export unit prices continued to fall. In July '23, the unit price was 11.7 US dollars/kg, down about 33.3% from last year's peak price (April '22, 17.6 US dollars/kg).
It is proposed to increase the capital of Jushi Biotech, increase the innovative drug business, and open up room for growth. The company recently announced that it is planning to increase the capital of Jushi Biotech in cash, obtain more than 51% of the shares in the target company, and achieve ownership of the target company.
Furthermore, according to the company's preliminary estimates, this capital increase does not constitute a major asset restructuring. Jushi Biotech is a wholly-owned subsidiary of Enbipu Pharmaceutical of Shiyao Group. It focuses on biopharmaceuticals such as antibodies, ADC, and mRNA. As of the announcement date, there are more than 20 research projects under development. Among them, 1 mRNA vaccine product is already on the market, 2 products are in the marketing stage, 3 products are in phase II/III clinical stage, and 3 products are in phase I clinical stage. This capital increase expands the company's business from the API business to the field of innovative drugs, further opening up space for the company to grow.
With the acquisition of Shiyao Shengxue, it is proposed to increase the health business. The company completed the acquisition of 100% of the shares in Shiyao Shengxue. Shiyao Shengxue is one of the main manufacturers of third-party acarbose APIs in China, and is also an important supplier of anhydrous glucose. After the technical reform is completed, it is expected that Shiyao Shengxue will become the largest third-party acarbose API manufacturer in China. As the share of downstream reagent companies expands, the company's API share will expand accordingly. According to the performance promise, after the acquisition was successful, the performance promise for 2022-2024 is no less than 81 million yuan, 91 million yuan, and 102 million yuan, respectively, after deducting non-net profit. As a platform for developing a major health sector under the Shiyao Group, the company is expected to take on other major health-related sectors such as vitamin APIs and traditional Chinese medicine under the Shiyao Group in the future. There are still expectations in terms of outreach.
Profit forecast: The company is expected to achieve net profit of 77/ 84/930 million yuan in 2023-2025, an increase of 5.6%/9.8%/10.3% over the previous year. The company is a leading caffeine API company. In the context of post-epidemic recovery, the company's health food business is expected to achieve restorative growth, and the company has completed the acquisition of Shiyao Shengxue, expanded acarbose and other businesses, increased profitability, and given an “increase in maintenance” rating.
Risk warning: risk of falling caffeine prices; risk of increased competition in the industry; decline in caffeine exports.