Net profit for 24Q1 was 750 million yuan, -6% YoY /-26% YoY. On April 8, the company released its quarterly report for 2014. 24Q1 achieved revenue of 6.5 billion yuan, -7% YoY/-10% YoY, and net profit of 750 million yuan (net of 640 million yuan), -6% YoY/-26% YoY (minus -19% YoY). 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 wind expectations of the company's 24-year average 17xPE. Considering the company's early development of synthetic biology platforms but the consolidation of the amino acid scale advantage, we will give a 24-year 13xPE valuation, with a target price of 14.56 yuan, maintaining a “buy” rating.
Price centers such as lysine, monosodium glutamate, and xanthan gum declined slightly, with net profit of 24Q1 feed amino acid revenue of 2.75 billion yuan, yoy +18% /qoq -8%. According to Boya Hexun, the average price of 98.5% lysine/ 70% lysine/ 99% threonine in the first quarter was 8.4/4.6/9.2 yuan/kg, yoy +9%/-8%/+15% (qoq -9%/-10%/-14%); flavoring agent revenue was 2.05 billion yuan, yoy -10% /qoq -qoq 6%. According to Baichuan Yingfu, The average price of monosodium glutamate in 24Q1 was 7,242 yuan/ton, yoy -14% /qoq -10%; pharmaceutical amino acid revenue was 130 million yuan, yoy -16% /qoq +2%; revenue from large raw materials and by-products was 950 million yuan, yoy -30% /qoq -19%; revenue from other products was 600 million yuan, yoy -26% /qoq -20%, as the decline in the xanthan gum boom dragged down the sector's profit. 24Q1 comprehensive gross profit margin 19.3% (yoy-0.5pct/qoq-3.9pct).
The amino acid boom is gradually picking up, and the company's size advantage continues to be consolidated
According to Boya Hexun, the price of 98.5% lysine/ 70% lysine/ 99% threonine was 10.65/5.6/10.65 yuan/kg on April 8, compared with +15%/+10%/+8% in early March. Due to the boom in export demand, etc., amino acid prices gradually picked up. Considering that lysine/threonine experienced long-term pattern optimization, the disorderly expansion and reshuffle of the industry was basically over. The good pattern combined demand recovery is expected to support continued profit improvement. The company's additional 250,000 tons/year threonine production capacity in 23 years will also help consolidate its leading edge in the amino acid field. According to Baichuan Yingfu, the price of MSG was 8199 yuan/ton on April 8, +2% compared to the beginning of March. Considering the immediate demand for MSG and the good competitive pattern, 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.