Incidents:
On October 30, 2023, Kaisai Biotech released its three-quarter report: in the first three quarters of 2023, the company achieved operating income of 1,565 billion yuan, -14.81% year-on-year; net profit of 314 million yuan, or 35.44% year-on-year. Net cash flow from operating activities was 530 million yuan, -18.32% year on year; gross sales margin was 28.48%, down 6.94 pct year on year; net sales margin was 22.57%, down 6.31 pct year on year.
In 2023Q3, the company achieved operating income of 535 million yuan, -2.51% year-on-year, +1.92% over the previous year; realized net profit of 72 million yuan, -51.89% year-on-year and -60.94% month-on-month. Net cash flow from operating activities was $206 million, -28.37%, -15.85% month-on-month; gross sales margin was 26.06%, down 10.19pct year on year, up 0.46pct; net sales margin was 16.61%, down 12.99pct year on year and 20.08pct month-on-month.
Investment highlights:
Affected by the international market, the gross profit of long-chain binary acids declined
In the first three quarters of 2023, the company achieved operating income of 1,565 billion yuan, -14.81% year-on-year; net profit of 314 million yuan, or 35.44% year-on-year. The decline in revenue and profit is mainly due to a decrease in the gross profit of the company's long-chain binary acid series compared to the same period due to the impact of the international market, and the decline in exchange earnings.
In 2023Q3, the company achieved net profit of 88.88 million yuan, a decrease of 104 million yuan over the previous month, mainly due to a decrease in exchange earnings. Financial expenses were 31.97 million yuan, an increase of 110 million yuan over the previous year.
Sales expenses were 8.65 million yuan, an increase of 1.95 million yuan, management expenses were 40.17 million yuan, an increase of 14.45 million yuan, and R&D expenses were 40.25 million yuan, an increase of 3.78 million yuan over the previous month.
Asset impairment losses were -1.18 million yuan, an increase of 12.34 million yuan over the previous month, and credit impairment losses were -1.35 million yuan, a decrease of 3.33 million yuan over the previous month.
A cooperation agreement was signed with the China Merchants Administration to guarantee the sales and promotion of polyamide. On June 25, 2023, Casai Biotech issued an announcement stating that by signing a “Business Cooperation Agreement” with China Merchants Group Co., Ltd., China Merchants will make every commercial effort to promote and implement the use of Casey's bio-based polyamide products to ensure implementation of the “1-8-20 target” for the first three years. “1-8-20 target” for the first three years: The amount of bio-based polyamide resin purchased and used by China Merchants in Casey Biotech products is not less than 10,000 tons, 80,000 tons, and 200,000 tons in 2023, 2024, and 2025, respectively. Starting from the end of 2024, the two sides will determine the form and volume of subsequent procurement products one year in advance.
China Merchants Group is an important state-owned backbone enterprise directly managed by the central government, making the development of green technology an important strategic plan. Compared with traditional chemical methods, the company's technical capabilities can effectively reduce carbon emissions in the field of basic materials manufacturing, environmentally friendly materials can be applied to various industrial sectors under China Merchants Group, and the two sides can develop collaboratively.
Since the polyamide production capacity of the Wusu plant was put into operation in 2021, production and sales have been under pressure, and cooperation with the China Merchants Bureau is expected to further accelerate the production and application of polyamide.
Taiyuan is building 900,000 tons of bio-based polyamide. It is optimistic that the company's long-term growth will be as of 2023H1. The company has a production capacity of 115,000 tons of long-chain dibasic acid, including 40,000 tons of sebacic acid. Wusu currently has a production capacity of 100,000 tons of bio-based pentanediamine, 500,000 tons of bio-based pentanediamine and 900,000 tons of bio-based polyamide projects, an annual output of 30,000 tons of long-chain binary acid, and 20,000 tons of long-chain polyamide projects under construction. I am optimistic about the company's long-term growth.
Profit forecasts and investment ratings take into account the weak demand for long-chain binary acids and adjust the company's profit expectations. The company's net profit for 2023-2025 is estimated to be 4.29, 7.71, and 1,165 billion yuan respectively, and the corresponding PE is 72, 40, and 27 times, respectively. Considering that the company's polyamide applications are expected to accelerate, maintaining the company's “buy” rating.
Risks indicate the risk that the project will not meet expectations, the risk of falling product prices, the risk of falling product demand, the risk of factory safety and environmental protection production risks, the risk of fluctuations in raw material prices, risk of exchange rate fluctuations, risk of sales falling short of expectations, etc.