Event

The company announces that it will report three quarters in 2023. In the first three quarters of 2023, the company achieved a total revenue of 325 million yuan (+ 18.88%), a net profit of 60 million yuan (- 22.41%) and a non-return net profit of 41 million yuan (- 25.26%). In a single quarter of 23Q3, the company achieved a total revenue of 126 million yuan (+ 23.48%), a net profit of 26 million yuan (- 8.17%) and a non-return net profit of 18 million yuan (- 4.06%).

Income growth accelerated and homing net interest rate improved quarter by quarter

1) the growth of income has accelerated. 2023Q3, company revenue + 23.48% year-on-year, revenue growth accelerated (23Q1, Q2 revenue + 16.18%, + 16.10%, respectively).

2) the fluctuation of gross profit margin is related to the changing factors of customer structure. In the first three quarters of 2023, the company's gross profit margin was 41.18%, year-on-year-3.70pctMagne23Q3, year-on-year-2.52pct, month-on-month-1.77pct. The fluctuation of gross profit margin is related to the changes in customer structure.

3) the return-to-home net interest rate fluctuates in the short term under the influence of exchange gains and losses, impairment and other factors. In the first three quarters of 2023, the company's parent net interest rate was 18.60%, year-on-year-9.90pct, mainly due to gross profit margin year-on-year-3.70pct, financial expense rate year-on-year + 5.22pct, asset impairment loss and credit impairment loss increased (income share year-on-year + 1.86/+2.32pct), investment income decreased (income share year-on-year-1.53pct), non-operating income decreased (income share year-on-year-1.33pct) The financial expenses are mainly exchange gains and losses caused by exchange rate fluctuations, other income changes are mainly due to the reduction of government subsidies in the current period, and non-operating income changes are mainly due to the reduction of DSM compensation. In terms of expense rate, in the first three quarters of 2023, the company's sales and management expense rate decreased by 1.12% compared with the same period last year, 1.38pct.

4) the 23Q3 homing net interest rate improved 1.78pct compared with the previous month. 23Q3, the company's homing net interest rate is 20.28%, year-on-year-6.99pct, month-on-month + 1.78pct, quarter-on-quarter improvement (23Q1, Q2 homing net interest rate is 16.30%, 18.50% respectively).

Under the double opportunities at home and abroad, the demand for ARA&DHA cornerstone products is expected to increase. 1) the new national standard of milk powder has landed, and the demand for ARA&DHA is high. The new national standard of milk powder has been formally implemented on February 22, 2023, and the demand for the addition of ARA&DHA is expected to increase steadily.

2) the substitution of algae oil DHA for fish oil DHA is expected to be accelerated. The algal oil DHA of the company is cultivated in a closed, clean and controllable environment. In the case of sea discharge in Japan, the replacement of fish oil DHA may be accelerated.

3) DHA is included in the raw material catalogue of health food and new application fields are added. In June 2023, DHA was included in the list of health food raw materials, opening a legal channel for its application in health food.

4) DSM's main patents expire, and there is a lot of room for overseas growth of ARA. In June 2023, DSM global ARA major patents expire, and the company's overseas ARA market share is expected to further increase in the future.

Investment suggestion

The company is a leading company in the domestic ARA&DHA industry, based on synthetic biology technology, benefiting from the 23-year landing of the new national standard for milk powder, DSM ARA global patent expiration, long-term upward logic. We expect the company's annual return net profit on 23-24-25 to be RMB 143,188 million, an increase of 55.56%, 43.27% and 30.31%, corresponding to PE31/22/17 times (market capitalization 3.1 billion yuan) on October 27, and maintain the "buy" rating.

Risk hint

Food safety risk, market competition aggravating risk, policy adjustment risk.