It is proposed to implement the 2024 employee stock ownership plan. The company that maintains the “buy” rating issued an announcement on January 16 to implement the 2024 employee stock ownership plan. This is the fourth year in a row that the company has introduced an employee stock ownership plan. The company has maintained a high dividend rate all year round and has implemented share repurchases for the past 5 years. The management announced on January 8 that it also shows confidence in future development. Considering the optimization of the amino acid competition pattern in the main business and the continuous improvement of synthetic biological platforms, we continue to be optimistic about value revaluation. The company expects a net profit of 32/36/42 billion yuan for 23-25 years, corresponding to EPS of 1.09/1.21/1.42. Referring to comparable company Wind's 24-year average of 18xPE, considering the initial development of the company's synthetic biology platform, it is given 24 years 12xPE valuation, target price 14.52 yuan, maintaining a “buy” rating.
Employee stock ownership plans have been launched for 4 consecutive years, demonstrating long-term development confidence. According to the company's announcement, the main contents of this employee stock ownership plan include: 1) the total amount is no more than 250 million yuan, corresponding to the closing price on January 16, about 24.63 million shares (accounting for 0.84% of the total share capital); 2) Participants include no more than 245 people including company directors, supervisors, senior managers, and core business executives, including 9 directors, supervisors, and senior management; 3) The source of shares in the employee stock ownership plan is secondary market purchases (including but not limited to) secondary market purchases (including but not limited to) Auction transactions, bulk transactions, agreement transfers, etc.), etc.; 4) The employee stock ownership plan lasts for 36 months, and the lockdown period is 24 months, all calculated from the date the company announced the last transfer of the underlying stock to the employee share ownership plan. The 12/24 month after the start of the lockdown period corresponds to 50%/50% of the unlocked shares.
Amino acid pattern optimization supports profit centers, and new production capacity increases profits. According to Boya Hexun, domestic lysine (98.5%) /threonine (99%) prices were 9.30/10.70 on January 16
Yuan/kg, down from the average price of 9.53/12.16 yuan/kg in 23Q4, mainly due to a decline in the price of raw corn, etc., but the year-on-year trend was still +6%/+20%. Considering that lysine/threonine experienced long-term pattern optimization, the disorderly expansion and reshuffle of the industry basically ended (in particular, the global production capacity CR3 of threonine reached 80% in 22). The pattern improvement is expected to support the long-term profit center. The company's additional 250,000 tons/year threonine production capacity is also expected to continue to contribute to the increase. In terms of MSG, according to Baichuan Yingfu, the average domestic price was 8,319 yuan/ton on January 16, -8% /yoy -12% compared to 23Q4. Considering the immediate demand attributes of MSG and the good competitive pattern (according to Boya Hexun, domestic production capacity CR3 reached 85% in '22), and the profit center is also expected to be supported in the future.
Synthetic biological platforms lead future growth, and active dividends and repurchases help long-term value revaluation companies cultivate the “amino acid+” strategy. Relying on long-term accumulation in the field of biological fermentation, they are focusing on building synthetic biological platforms. Along with the expansion of products such as colloidal products, branched chain amino acids, pharmaceutical intermediates, and Prulan polysaccharides, it is expected to create a new growth curve. The company has long focused on shareholder returns. The dividend rate for 12-21 was over 50%, the average dividend rate for 18-22 (cumulative dividend/cumulative net profit) was about 53%, and the share repurchase plan was launched for 5 consecutive years in 19-23. We believe that with the optimization of the main business pattern, the expansion of synthetic biotechnology, and the help of high dividends+repurchases+increased holdings+employee shareholding, the company's long-term value is expected to be revalued.
Risk warning: demand falls short of expectations; competition for amino acids deteriorates; progress in new technologies falls short of expectations.
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