Core views:
Kaisai Biotech released its report for the third quarter of 2023. In 23Q1-Q3, the company achieved total revenue of 1,565 billion yuan, -14.81% year-on-year, net profit of 314 million yuan, or -35.44%; 23Q3 achieved total revenue of 535 million yuan, -2.51%, +1.92% over the previous year, and realized net profit of 72 million yuan, -51.89% year-on-year and -60.94% month-on-month.
Performance declined year-on-year under pressure from demand, increased costs led to a month-on-month decline in Q3 profit, and continued promotion of bio-based nylon applications. In the first three quarters of the 23 years, the company's main products, long-chain binary acid series products, were affected by weak downstream demand, and the company's profit declined year-on-year. The 23Q3 company's revenue increased month-on-month, with gross margin +0.46pct month-on-month to 26.06%, 23Q3 financial expenses of -032 million yuan, +110 million yuan month-on-month, and net profit margin -20.08 pct to 16.61% month-on-month. According to the company's official account, the torch handle used at the opening ceremony of the Hangzhou Asian Games uses the company's bio-based polyamide material, which reduces carbon emissions by more than 50% compared to traditional products.
The China Merchants Bureau invested in shares and collaborated, and the construction of the Taiyuan base continued to advance, demonstrating confidence in the repurchase of shares. According to the “Business Cooperation Agreement” announcement signed between the company and the China Merchants Bureau, the China Merchants Bureau will purchase no less than 10,000, 80,000, and 200,000 tons of the company's bio-based polyamide resin in 23-25, respectively. As of Q3, the company's projects under construction reached 4.849 billion yuan, +152.80% over the same period last year. The projects under construction with an annual output of 30,000 tons of long-chain dibasic acid and 20,000 tons of long-chain polyamides are expected to be put into operation in December '23, and the projects with an annual output of 500,000 tons of bio-based pentanediamine and 900,000 tons of bio-based polyamides are expected to be put into operation in December '24. On August 31, the company announced that shares will be repurchased through centralized bidding transactions. The total repurchase capital is 0.5 to 100 million yuan, and the maximum repurchase price is 93 yuan/share. It plans to use the repurchased shares for employee stock ownership plans or equity incentives.
Profit forecasts and investment advice. The company's EPS for 23-25 is expected to be 0.84/1.14/1.65 yuan/share, respectively. Based on the future development potential of the synthetic biology industry and the company's leading position in the bio-based long-chain binary acid and bio-based polyamide industry, the company's reasonable value is maintained at 68.98 yuan/share, corresponding to the 24-year performance of about 60 times the PE valuation level, maintaining the company's “buy” rating.
Risk warning. Risk of fluctuations in raw materials and energy prices; production progress of new projects falling short of expectations; production safety risks.