Incidents:
On the evening of April 8, the company released its 2024 quarterly report. In the first quarter, the company achieved operating income of 6.5 billion yuan, a year-on-year decrease of 6.7%; realized net profit of 750 million yuan, a year-on-year decrease of 6.1%; and realized net profit after deduction of 640 million yuan, a decrease of 19.0% year-on-year.
The quantity and price of amino acids in feed have risen sharply, and the performance is in line with market expectations
2024Q1's revenue and profit declined year-on-year, mainly due to falling prices of xanthan gum, monosodium glutamate, and large raw materials and by-products in the first quarter. However, the rise in lysine prices and the sharp increase in threonine volume and price made up for a certain decline. 2024Q1's revenue share of flavors/feed amino acids/pharmaceutical amino acids/large raw material by-products/others (containing xanthan gum) was 32%/42%/15%/9%, respectively, with revenue of -10%/+18%/-16%/-30%/-26%, respectively.
Looking ahead to the market, the prices of su and lysine have bottomed out since late February and continued to rise, and MSG prices have also risen steadily. Up to now, the price of 98% lysine/ 99% threonine has rebounded 17%/8% from the bottom price of Q1 to 10.65/10.65 yuan/kg, up 25%/13% from the same period last year, while the spot price of corn raw materials fell 13% year on year, and the business profit center is expected to be boosted.
Actively lay out synthetic biology to open up space for growth
In recent years, the company has actively increased R&D investment in the field of synthetic biology, 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, and Shanghai Jiao Tong University, built a doctoral laboratory team and high-level support platform, completed the layout of research forces in the entire synthetic biology industry chain, which is expected to open up room for growth in the field of synthetic biology.
Maintain a high dividend and high repurchase policy for a long time
In addition, the company has been giving back to shareholders with a high dividend rate. Since listing, the cumulative dividend amount has reached 9.15 billion yuan, and the cumulative dividend rate has reached 50.3%. The company plans to pay dividends of nearly 1.2 billion yuan in 23. 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.
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