Event: The company released its 2023 annual report and 2024 quarterly report. In '23, we achieved revenue of $1,938 million, +37% year over year, and achieved net profit of 449 million, +40% year over year, which is basically in line with the performance forecast. 24Q1 achieved revenue of 501 million yuan, +25%/-13% YoY, net profit to mother of 87 million yuan, +7%/-33% YoY, deducted non-net profit of 86 million yuan, and +10%/-30% YoY.
Profitability remained high for 23 years. The company's amino acid products/vitamin products performed well in '23, with revenue of 1,47/220 million yuan, +26%/+575%, respectively, and gross margin of 43%/55%, +0.95/+18.52pct, respectively. Although the price of valine, the company's main product in '23 fell due to industry expansion. According to Boya Hexun, the unit price of valine at the end of '23 was 16.75 yuan/kg, -33%. However, the company still achieved revenue growth with volume compensation. Sales of amino acid products reached 772,000 tons, +30% year-on-year.
The drop in valine prices in 24Q1 affected performance. 24Q1 valine prices continued to be under pressure. The average price in Q1 was 15.53 yuan/kg, 42%/-16%, reducing the company's profitability. 24Q1 company's gross margin was 33.58%, -5.26/ -5.09pct; net profit margin was 17.15%, or -3.14/-5.01pct month-on-month. The total cost ratio is relatively stable, -0.54/+0.21pct month-on-month. However, the number of inventory turnover days increased, affecting operating cash flow. The net present ratio for 24Q1 was -1.19.
The three major projects have been completed, and the product matrix continues to be enriched. The company has completed the construction of three major projects: a production base project with an annual output of 50,000 tons of biobased succinic acid and raw materials for biobased products at the Chifeng base, a bio-based 1,3-propanediol project with an annual output of 50,000 tons, and a bio-based malic acid project with an annual output of 50,000 tons at the Qinhuangdao base. Currently, production capacity is climbing. 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 Production Project with an annual output of 25,000 tons of valine, arginine, and 1,000 tons of inositol.”
Investment advice: Many of the company's production capacity projects are in a climbing phase, and future growth can be expected. We expect net profit to be 6.57/8.61 billion yuan for 24/25/26, corresponding to PE of 26.1/19.9/13.6x, maintaining a “buy” rating.
Risk warning: Project commissioning falls short of expectations, raw material costs fluctuate, demand falls short of expectations, exchange rate fluctuations.