Net profit for the year 23 was -28%, maintaining the “purchase” rating. The company released its annual report on March 18. The company achieved annual revenue of 27.76 billion yuan, -0.6% year-on-year, net profit to mother of 3.18 billion yuan (before deducting 3.08 billion yuan), -28% year-on-year (excluding -27% year-on-year); of these, 23Q4 revenue was 7.23 billion yuan, +1.7% /month-on-month +4.3%, net profit not attributable to mother., +18% YoY/Month-on-Month +42%.
The company plans to pay out 0.417 yuan (tax included) per share, with a total dividend of about 1.2 billion yuan (tax included). We expect the company to have a net profit of 33/38/4.1 billion yuan in 24-26 years, corresponding to EPS of 1.12/1.28/1.38 yuan, which is comparable to the company's 24-year average Wind expectation of 18xPE. Considering the early development of the company's synthetic biology platform, we give a 24-year 13xPE valuation, with a target price of 14.56 yuan, maintaining a “buy” rating.
Amino acid sales continued to grow, and the decline in product sentiment dragged annual profit of animal nutrition amino acid sales yoy +7.5% to 2.64 million tons, mainly driven by increased sales volume due to increased threonine production. Due to pressure on amino acid demand and prices, segment revenue yoy -2.5% to 14.5 billion yuan, gross margin yoy-11.0pct to 12.2%; sales volume in the flavorings sector yoy +1.4% to 1.05 million tons, due to the year-on-year decline in monosodium glutamate prices, sector revenue -2.6% to 9.83 million yuan, benefiting from improvements in gross costs. interest rate YOY+1.3pct to 22.9%; medical amino acid sales yoy +5% to 9962 tons, revenue yoy +2.3% to 550 million yuan, gross margin yoy-6.6pct to 27.3%. Revenue in the other product segment was +15% to 2.5 billion yuan. Among them, demand for petroleum-grade xanthan gum was relatively strong, and the gross margin yoy-3.5pct was yoy-3.5pct to 48.8% due to falling prices of fertilizers, etc. The annual cost rate yoy-0.7pct to 5.8%.
The amino acid boom is expected to gradually pick up, and the company's scale advantage continues to consolidate. According to Boya Hexun, the price of lysine (98.5%) /threonine was 10.25/10.40 yuan/kg on March 18, compared with +11%/+5% in early March. Considering that lysine/threonine experienced long-term pattern optimization, the industry's disorderly expansion and reshuffle basically came to an end (in particular, CR3, the global production capacity of threonine reached 80% in 22). The good pattern combined with future demand recovery is expected to support continued profit improvement. The company added 250,000 tons/year of threonine production capacity in 23 Consolidate amino acids Leading edge in the field. According to Baichuan Yingfu, MSG was 8069 yuan/ton on March 18, +1% compared to the beginning of March. Considering the immediate demand for MSG and the good competitive pattern (according to Boya Hexun, domestic production capacity CR3 reached 85% in '22), 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 to deeply cultivate the “amino acid+” strategy, rely on long-term accumulation in the field of biological fermentation to build a synthetic biological platform. Along with the expansion of products such as branched chain amino acids and pullulan 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 16-23 (cumulative dividend/cumulative net profit) was about 55%, the share repurchase plan was introduced for 5 consecutive years in 19-23, and the employee stock ownership plan was implemented for 4 consecutive years from 21-24. We believe that with the optimization of the main business pattern, the expansion of synthetic biotechnology, and the help of high dividends+repurchases+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.