The company released its 2023 performance report: During the reporting period, the company achieved revenue of 21.14 billion yuan (YoY -13.39%), achieved net profit of 367 million yuan (YoY -33.66%), and achieved net profit of 290 million yuan (YoY -45.39%) after deduction. The performance fell short of expectations. Among them, 23Q4 achieved revenue of 549 million yuan (YoY -9.07%, QoQ +2.55%), realized net profit of 53 million yuan (YoY -20.77%, QoQ -26.21%), and realized net profit of 34 million yuan (YoY -40.49%, QoQ -35.30%) in a single quarter, falling short of expectations. The company's performance declined significantly year-on-year in 2023. The main reasons are: 1) sales of the company's long-chain diacid series products declined due to factors such as the international market environment and industry; 2) overseas market promotion fell short of expectations after sebacic acid was put into production; 3) the bio-based polyamide series was still undeveloped during the commercialization and promotion phase, and increased R&D investment dragged down performance.

Sales of the long chain binary acid series have declined, sebacic acid replacement is underway, and commercialization of polyamide will still take time, causing the company's performance to continue to be under pressure. According to the company's announcement, Kaisai is a pioneer in the field of biological manufacturing. In 2003, it industrialized biological long-chain diacid, and gradually completed market substitution for similar chemical products, leading the market share in the world.

Since 2023, due to factors such as the international market environment and industry, especially the decline in sales in the European market, the company's long-chain binary acid revenue and gross profit declined significantly year-on-year. At the same time, the company's additional 40,000 tons of sebacic acid production capacity is gradually being released. The product has been approved by domestic customers, but certification by international customers will still take time. It is expected that the product will gradually replicate the company's process of replacing lauric acid with chemical methods. In terms of bio-based polyamides, related products are in the early stages of application scenario development and verification, and have not yet been officially released. Combined with continuous R&D investment in application technology, processing equipment, and molding technology for new bio-based materials, this has dragged down the company's performance.

Continue to promote bio-based polyamide application development, strengthen market promotion with China Merchants Group, and open up new growth space with collaborative development. The company continues to increase the application, development and promotion of biological and polyamide products. With the advantages of “renewable raw materials, recyclable products, and competitive costs”, the company has made positive progress in textile and clothing, curtain cloth, composite materials, etc. During the reporting period, the company issued a fixed increase plan to raise no more than 6.6 billion yuan by issuing shares to Shanghai Yaoqin (to be established). China Merchants Group is expected to indirectly hold more than 5% of the company's shares through Shanghai Yaoqin. At the same time, the company and China Merchants Group signed a “Business Cooperation Agreement”. According to the agreement, the amount of bio-based polyamide resin purchased and used by China Merchants Biotech in 2023-2025 was not less than 10,000 tons, respectively. China Merchants Group's main business involves many fields such as shipping, ports, shipping, finance, real estate, energy, etc., and combines the company's bio-based materials with China Merchants Bureau's resource endowments to jointly develop bio-based polyamide fiber composites, pultrusion processes, and application technologies in the fields of containers, construction, photovoltaics, logistics, etc., providing a broad range of application scenarios for synthetic biological manufacturing.

Investment analysis opinion: According to the 2023 performance report, net profit from 2023 was lowered to 367 million yuan (original value was 421 million yuan). Considering that the company's bio-based polyamide application promotion will still take time, the 2024-2025 net profit forecast was reduced to 5.92 billion yuan or 917 million yuan (original value was 7.19 billion yuan and 1,058 billion yuan). The PE corresponding to the current market value is 78, 48, and 31X. With the investment of China Merchants Bureau, the company's future performance growth rate is expected to reach 58%. “Accumulation” rating.

Risk warning: 1) Risk of uncertainty about new project construction progress, product delivery progress and sales; 2) risk of core technology leakage, loss of technical personnel, and delays in technology research and development; 3) risk of large fluctuations in raw materials and energy prices.