Incidents:
On March 18, 2024, the company released its annual report. In 2023, it achieved operating income of 27.8 billion yuan, a year-on-year decrease of 0.6%, and realized net profit to mother of 3.2 billion yuan, a year-on-year decrease of 27.8%. In 2023, the company plans to distribute a cash dividend of 417 yuan (tax included) for every 10 shares, and is expected to distribute a cash dividend of about 1.2 billion yuan.
Results were in line with expectations, with high month-on-month growth in Q4 results in a single quarter
The company's revenue declined and net profit declined in 2023, mainly due to falling prices of products such as sulfuric acid and lysine. The animal nutrition amino acid business achieved revenue of 145 billion yuan, a year-on-year decrease of 2.5%, accounting for 52% of revenue, a gross profit margin of 12.2%, and a year-on-year decrease of 11.0 pcts. The food taste business achieved revenue of 9.8 billion yuan, a year-on-year decrease of 2.6%, accounting for 35% of revenue, a gross profit margin of 22.9%, and a year-on-year increase of 1.3 pct. Looking at a single quarter, 23Q4 achieved net profit of 1.02 billion yuan, up 29.1% year on year and 5.9% month on month.
Looking ahead to the future market, although there has been a month-on-month decline in off-season prices of Su and Lysine since the first quarter of '24, the prices of 98% lysine and threonine increased 7.0% and 15.0%, respectively, compared to 23Q1. Combined with the decline in raw corn prices, the business profit center is expected to increase significantly.
Continued high dividends and high repurchases to give back to shareholders
Since its listing, the company has been giving back to shareholders with a high dividend rate. The cumulative dividend amount has reached 9.15 billion yuan, and the cumulative dividend rate has reached 50.3%. The company plans to distribute nearly 1.2 billion yuan in 23 years. Since 19, the company has introduced several share repurchase plans. The latest repurchase plan was announced in April 2023. It is proposed to cancel the share capital with a repurchase price of no more than 12 yuan/share, with a total amount of 800 to 1 billion yuan for a period of 12 months.
Lay out synthetic biology to prepare for high growth
The company has increased R&D investment in synthetic biology technology applications in recent years. In 2023, the company successfully introduced nearly 40 professional and technical talents from famous universities at home and abroad, such as the Chinese Academy of Sciences (Tianjin Institute, Institute of Microbiology), Tsinghua University, Shanghai Jiao Tong University, etc., and built a high-level support platform including metabolic pathway design, gene editing and strain construction, enzyme engineering transformation, product application development, and precision fermentation, completing the research force layout of the entire synthetic biology industry chain. The future is expected to open up room for growth in the field of synthetic biology.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2024-26 to be 291/304/31 billion yuan, with year-on-year growth rates of 5%/5%/2%, respectively, net profit to mother of 33/35/3.7 billion yuan respectively, year-on-year growth rates of 4%/7%/5%, EPS 1.13/1.20/1.26 yuan/share, respectively, and a 3-year CAGR of 5%. In view of the high concentration of the company's main business and improved prosperity, and deep cultivation of synthetic biology to open up room for growth, we maintained the company's target price of 15.52 yuan and maintained a “buy” rating.
Risk warning: Prices of su/lysine and corn/coal fluctuate greatly, potential competitors enter, and progress in the field of synthetic biology falls short of expectations