Event: The company released its 2023 three-quarter report. Revenue for the first three quarters was 880 million yuan, +6.06% year-on-year, net profit of 5532.31 million yuan, +2.05%; net profit for the third quarter alone was 336 million yuan, +13.1% year-on-year, and net profit of 238.534 million yuan, +41.93% year-on-year. Among them, the revenue of the enzyme preparation business increased by 22.2819 million yuan year-on-year, +21.39% year-on-year.
The company's gross profit margin for the first three quarters was 44.34%, up 2.06pct year on year, while the gross profit margin for the third quarter alone was 44.59%, +3.95pct year on year. R&D expenses in the first three quarters were +12.37% year-on-year, a record high for the same period. The increase in the company's gross margin is mainly due to the company adhering to the technological innovation strategy and continuing to increase investment in R&D. Through the effective application of new gene screening technology, high-efficiency enzyme products have been developed; through protein engineering, some products have improved specific enzyme activity and temperature resistance, increased enzyme application effects, and reduced costs; through expression systems (chassis cells), regulatory factors have been further improved and optimized, fermentation levels have been improved, and costs have been reduced. At the same time, the product sales structure was optimized.
The aquaculture industry is in a downward cycle, and enterprises have a high demand to reduce feed costs. The company's VLAND-PCP customized enzyme solution (precise customization based on the big data system for feed enzyme applications) platform has sufficient enzyme data for feed ingredients and maintains iteration, which can help major customers solve problems such as feed conversion efficiency and improve digestion and absorption of raw food. It is one of the solutions for reducing costs and efficiency in weak markets.
The company has continued to invest in large-scale R&D. It has built four high-efficiency protein expression systems and corresponding large-scale fermentation systems, including Xylella ricorrhoeae, Aspergillus niger, and Bacillus niger, built industry-leading high-throughput screening workstations, and established core systems such as a general high-throughput genetic screening big data model and protein engineering transformation, greatly improving the catalytic efficiency and industrial application properties of enzyme preparations, and enhancing technological innovation capabilities in the biological industry.
The market space for probiotics in China is large, and demand is growing rapidly. Currently, the company's probiotic products target the enterprise side as well as products for individual consumers. Although the probiotic track has just begun, the continued increase in domestic demand will bring a high growth rate to the company's related sectors.
The company's wholly-owned subsidiary and Evonik (China) jointly established Evonik Blue Biotech Co., Ltd. to expand the global intestinal health solutions business for farmed animals. The joint venture is scheduled to commence operations in the first quarter of 2024. This partnership helps the company promote the development of global business.
Investment advice: maintain a “buy” rating. Based on the above analysis, the company's 2023/2024/2025 operating income is estimated to be 1,281/14.19/1,582 billion yuan, net profit of 1.23/1.43/160 million yuan, and EPS of 0.49/0.57/0.63 yuan respectively. The current stock price corresponding to PE is 28.9/24.8/22.2 times. Maintain a “buy” rating.
Risk warning: marketing and sales risks; downstream aquaculture industry cycles and risk of outbreaks of outbreaks; risk of raw material price fluctuations; there is a risk that public information used in research reports may be lagging behind or not being updated in a timely manner.