Core views
The company achieved a gross profit margin of 33.6% in Q1. The main reason for the month-on-month decline was the drop in the price of the main product, valine. Currently, the negative factors in soybean meal have responded sufficiently, and with the expansion of the company's export business, cost reduction, and industry growth, the valine business will gradually pick up steadily.
The company's construction project at the end of 2023 was 1,517 billion yuan, a year-on-year increase of 290%. Many new products such as PDO and succinic acid are about to be released this year, driving the company's performance growth. It is expected that Q2 performance will improve markedly. Over the long term, the company will gradually expand into the field of amino acids to the intermediates field.
occurrences
The company released its 2023 annual report and 2024 quarterly report. The company achieved revenue of 1,938 million yuan in 2023, +36.6% year over year, and net profit to mother of 339 million yuan, +40.3% year over year. The company achieved revenue of 501 million yuan in Q1 in 2024, +25.1% year-on-month, and -12.7% month-on-month; realized net profit to mother of 87 million yuan, +6.62% year-on-year and -32.6% month-on-month.
Brief review
The traditional off-season compounded the decline in valine, and the Q1 performance growth rate slowed in the short term. The company achieved a gross profit margin of 33.6% in Q1 and a 5.1% month-on-month decline. The main reason was the decline in the price of valine, the main product. With the introduction of new production capacity in the industry and the decline in soybean meal prices, the average price of valine from the beginning of 2024 to now is 15,500 yuan/ton, a year-on-year decrease of 31.8%. Looking at valine products, due to abundant global soybean production in 2023/2024, soybean meal prices were at a standstill; however, short and medium term companies can lock in part of their profits and gradually expand their export business through long-term customer cooperation. In the medium term, as the company optimizes technology and the low-cost Inner Mongolia base gradually releases production capacity, the company's cost center will move downward, and the long-term industry will maintain a high natural growth rate. It is expected that the valine business will gradually pick up steadily.
New products have entered a rapid launch period, and the company has reached a new level
The company's projects under construction at the end of 2023 amounted to 1,517 billion yuan, a year-on-year increase of 290%, and the projects under construction at the end of 24Q1 amounted to 1,679 billion yuan, continuing to increase 10.7% month-on-month. This year has been a harvest year for the company to lay out many new products. Looking at 50,000 tons of PDO, 50,000 tons of succinic acid co-produced valine, 50,000 tons of malic acid co-produced tryptophan, and 25,000 tons of arginine co-produced valine projects, the long term, the company also has enough growth momentum for 60,000 tons of three-chain amino acids, tryptophan and 10,000 tons of refined amino acids, Hefei Changfeng's 50,000 ton PDO project (EIA announced on April 10 this year), and the layout in the methionine field.
Profit forecasting and valuation: The company's many single products are about to be released, which is expected to contribute significantly to a significant increase in performance. The company's net profit for 2024-2026 is estimated to be 648, 11.09, and 1,481 billion yuan, respectively. The corresponding PE is 26.5X, 15.5X, and 11.6X, respectively, maintaining a “buy” rating.
Risk warning: raw material prices fluctuate; downstream demand falls short of expectations; project commissioning falls short of expectations, etc.