Incident: The company released its 2023 performance report. After preliminary accounting, the company achieved total revenue of 445 million yuan in '23, an increase of 2.78% over the previous year, and net profit to mother of 92 million yuan, an increase of 42.17% over the previous year.
1. Net profit has been growing for four consecutive quarters, and the fundamentals have stabilized in 23 years. The overall trend is expected to improve. According to the company's performance report, the company will benefit from the implementation of the new national standard for infant formula in 2023, and the company's ARA and DHA products will benefit from increased market demand. Judging from the performance, the company's 23Q4 net profit is expected to achieve 31 million yuan, an increase of 330.54% over the previous year, mainly due to 22Q4's preparation for long-term equity investment, accounts receivable and prepaid accounts related to the participating company Farmaco.
Since 22Q4, thanks to a combination of factors such as a rebound in share payment fees and an increase in gross profit due to increased revenue, the company's net profit to mother has increased for four consecutive quarters, with 43.56%/24.48%/21.66% in 23Q2/Q3/Q4, respectively. We believe that in 2024, with the transfer of the company's new powder production capacity and the steady development of the company's overseas markets, the company's overall performance is expected to improve further.
2. The synthetic biotechnology layout continues to advance, and the main product HMO has entered the approval stage of the Health and Health Commission? In terms of layout, as of March '24, the company has established eight major technology platforms, including bioinformation and biocomputing platforms, gene synthesis and gene editing platforms, cell factory casting platforms, intelligent fermentation and fine metabolism control platforms, efficient intelligent separation and refining platforms, product application technology development platforms, high-throughput analysis and testing platforms, and pilot transformation platforms for biotechnological achievements. The main construction project of the Wuhan Synthetic Biology Innovation Center, which was built by the company and various resources such as the Wuhan Industrial Innovation and Development Research Institute, was fully sealed in November 23. The center will serve as a leader in the synthetic biology industry in central China, build a national incubator for synthetic biology and provide an innovation platform for the industry.
In terms of products, as of December 23, the company's HMO (breast milk oligosaccharide) products were submitted in 23Q1, passed the biosafety review by the Ministry of Agriculture, and are currently undergoing food safety certification by the Health and Health Commission. At the same time, the company's HMO production capacity layout is also being carried out in an orderly manner, and the company expects to complete construction in the first half of '24. Specifically, the varieties in the company's reserves include 2' - FL, 3 '- SL, 6' - SL, LnnT, etc. Among them, 2' -FL has completed pilot testing and is the company's main product in advancing the industrialization process.
Profit forecast & investment advice: According to the company's 2023 performance report, we lowered our profit forecast. It is estimated that in 2023-25, the company will achieve revenue of 4.45/5.62/757 billion yuan (24-25 years ago value: 6.06/867 billion yuan), up 2.78%/26.23%/34.6% year on year; net profit to mother 0.92/1.17/ 153 million yuan (24-25 years ago value: 1.95/316 million yuan), up to 42.17%/27.9%/30.29% year on year The stock price on 3/22/24 corresponds to 23-25 PE 27/21/16x. We are optimistic about the company's fundamentals now stabilized and future developments in synthetic biotechnology to maintain a “buy” rating.
Risk warning: The data contained in the report is unaudited preliminary accounting data. The specific data is based on the data disclosed in the company's annual report; HMO approval progress for synthetic biological products falls short of expectations; the release of market demand for new products falls short of expectations; and overseas market expansion falls short of expectations.