Key points of investment:
The company released its 2023 annual report, and the results were in line with expectations: during the reporting period, the company achieved revenue of 1,938 million yuan (YoY +37%), realized net profit of 438 million yuan (YoY +44%), gross sales margin of 40.52% (YoY+1.86pct), net profit margin 23.04% (YoY+0.53pct), sales, management and finance expenses increased by 9.04% (YoY+0.52pct), while R&D expenses increased 38% to 38% year-on-year 1.09 billion yuan. Among them, 23Q4 achieved revenue of 574 million yuan in a single quarter (YoY +32%, QoQ +12%), net profit attributable to mother of 129 million yuan (YoY +25%, QoQ +0%), net profit after deduction of 123 million yuan (YoY +22%, QoQ -2%), gross sales margin 38.67%, with year-on-month changes of -1.60pct, -1.68pct, net profit margin 22.16%, year-on-month, respectively. 2023 Company Profit Distribution Plan: It is proposed to distribute a cash dividend of 0.90 yuan (tax included) per share, and the share capital is increased by 0.45 shares per share through capital reserve.
The company released its 2024 quarterly report. The results were in line with expectations: during the reporting period, the company achieved revenue of 501 million yuan (YoY +25%, QoQ -13%), realized net profit of 87 million yuan (YoY +7%, QoQ -33%), realized net profit without return to mother of 86 million yuan (YoY +10%, QoQ -30%), gross sales margin of 33.58%, year-on-month changes of -5.26pct and -5.09pct, respectively., - At 5.01 pct, the cost is basically stable. 24Q1's revenue and profit declined month-on-month, mainly due to the decline in valine prices. At the same time, the production line for the new project was basically in the commissioning stage and did not contribute to a significant increase.
24Q1 Continued low valine prices put pressure on performance in the short term, and products such as alanine and inositol continued to rise. According to Boya Hexun data, the price of 23H2's L-valine products rose from August to a peak of 23.25 yuan/kg in September and October as demand continued to rise as high as strong demand, and profitability continued to recover. However, after the peak feed season in October, demand for products weakened, new production capacity in the industry was released, and the price of soybean meal continued to fall. The market price of L-valine fell accordingly. The price of L-valine fell below 15 yuan/kg in February '24. According to Boya Hexun data, the average market price of 24Q1's L-valine products was 15.54 yuan/kg, down 42% year on year and -21% month-on-month. Continued low prices put pressure on the company's performance in the short term. However, considering the continuous improvement of the company's L-valine process, the simultaneous decline in the price of corn on the raw material side, and the steady progress of the soybean meal reduction and substitution trend, compounded by the increase brought about by the steep commissioning of the new 24Q2 project, it is expected that the company's performance will once again enter a continuous upward channel on a month-on-month basis.
Promote the construction of new product projects with high quality, continue to expand the company's product matrix, and open up space for growth with a diversified layout. During the reporting period, the company completed the Chifeng base with an annual output of 50,000 tons of biobased succinic acid and biobased product raw material production base project with an annual output of 50,000 tons, and the Qinhuangdao base with an annual output of 50,000 tons of bio-based malic acid construction project. The company's products and technology were expanded from amino acids, vitamins, etc. to new bio-based material monomers, bringing performance increases to 2024 and 2025 while further opening up development space. In 2024, the company will accelerate the implementation of the Bayannaoer base's “project with an alternating annual output of 60,000 tons of three-chain amino acids, tryptophan, and 10,000 tons of refined amino acids” and the Chifeng base's “biomedical alternating annual production of 25,000 tons of valine, arginine and 1,000 tons of inositol construction project” to continuously enrich the product structure and further enhance market competitiveness and profitability. In addition, the company is promoting the industrialization of products related to high-silk amino acids and various new material intermediate products in an orderly manner, laying the foundation for further growth in the future. As of the 2024 quarterly report, the company has fixed assets of 1,178 billion yuan and projects under construction of 1,679 billion yuan.
Investment analysis opinion: Considering that many of 24H1's projects are still in the commissioning and climbing stage, and subsequent investment in R&D of new products and new projects continues, the 2024-2025 net profit forecast was lowered to 6.02 billion yuan, 1,071 billion yuan (original value was 6.68 billion yuan, 1,188 billion yuan), and the net profit forecast for 2026 was 1,444 billion yuan. The PE corresponding to the current market value is 28, 16, and 12X. According to Wind's unanimous expectations, the average PE of companies Kaisai Biotech and Huaxi Biotech in 2024 is 30X, maintaining the “Overweight” rating.
Risk warning: 1) Risk of core technology leakage, loss of technical personnel and technical change; 2) risk of large fluctuations in raw materials and energy prices; 3) risk of uncertainty about the construction progress of new projects, product delivery progress, and sales.