The 2023 results are in line with our expectations, and the 1Q24 results are slightly lower than our expectations. The company achieved operating income of RMB 1,938 million, an increase of 36.6% year on year; net profit to mother of RMB 449 million, an increase of 40.3% year on year. Among them, 4Q23 achieved total revenue of 574 million yuan, up 32.0% year on year and 11.6% month on month; net profit to mother was 129 million yuan, up 25.4% year on year and 0.3% month on month. The 2023 results are in line with our expectations.
Sales/management/R&D/finance expenses rates in 2023 were 2.6%/6.3%/5.6%/0.2%, respectively, +0.5/-1.68/+0.63/+0.07ppt, respectively, and remained stable. In order to carry out new project construction, the company's loans increased. Short-term loans were 920 million yuan, +1055% year-on-year, and long-term loans increased by 300 million yuan. The company's balance ratio reached 54%, +27.1ppt compared to the same period last year. The production and sales volume of amino acid products in 2023 was 787/77,200 tons respectively, +22.7/ 29.9% year-on-year, respectively. Revenue from amino acid/vitamin products was 1,47/220 million yuan respectively, accounting for 75.6/11.2% of revenue, and gross margin of 43%/55%, respectively. Overseas revenue accounted for 40.86%, +4.35ppt year on year.
1Q24 achieved operating income of 501 million yuan, up 25.1% year on year, down 12.8% month on month; net profit to mother was 87 million yuan, up 6.6% year on year and down 32.9% month on month. The 1Q24 performance was slightly lower than our expectations, mainly due to falling prices for the company's main products.
Development trends
Product prices fell in 1Q24, putting pressure on short-term results. According to Boya Hexun, the average quarterly prices of 1Q24's products valine/calcium pantothenate/inositol were -16%, -8%, and -30% month-on-month, respectively, while the price of the company's main raw material, corn, was -9% month-on-month. The average quarterly price of soybean meal in 1Q24 was -12% month-on-month. Since the increase in demand for valine mainly benefits from reduced soybean meal replacement, we expect that the decline in soybean meal prices will reduce the growth rate of demand for valine to a certain extent, while changes in the supply pattern have exacerbated the decline in valine prices.
Production capacity construction is progressing smoothly, enriching the layout of bio-manufacturing products. According to the announcement, the company's Chifeng base's project with an annual output of 50,000 tons of biobased succinic acid and 50,000 tons of bio-based 1,3-propanediol, and the Qinhuangdao base project with an annual output of 50,000 tons of bio-based malic acid can achieve continuous mass production in 2024. At present, the company's products include amino acid series products, vitamin series products, bio-based new material monomers, etc., and the product layout is gradually being enriched.
Profit forecasting and valuation
We maintain our 2024/2025 profit forecast of $603/780 million, and the current stock price corresponding to 2024-2025 P/E is 28/22x, respectively. Maintaining the target price of 126.04 yuan, corresponding to the price-earnings ratio of 33/25x for 2024-2025, respectively, there is 16% room to rise compared to the current stock price, maintaining the “outperforming industry” rating.
risks
The commissioning of new production capacity fell short of expectations, product marketing progress fell short of expectations, and product prices fell.