Incident: The company recently released its 2023 annual report and 2024 quarterly report. In 2023, it achieved revenue of 1,938 million yuan, and realized net profit of 449 million yuan, +40.43% year over year. In 2023, the company plans to distribute a cash dividend of 9 yuan (tax included) to all shareholders for every 10 shares based on 157 million shares, totaling 31.47% of net profit due to mother; at the same time, it increased 4.5 shares per 10 shares, a total increase of 706.696 million yuan Shares.

2024Q1 achieved operating income of 501 million yuan, +25.12% year over year, and realized net profit to mother of 86.5941 million yuan, or +6.62% year over year.

Various businesses will grow steadily in 2023, and leading synthetic biology companies can be expected to develop. As a leading enterprise in the synthetic biology industry, the company's main products include amino acid series products (L-alanine, beta-alanine, L-valine), vitamin series products (calcium D-pantothenate, D-panthenol, inositol), bio-based new material monomers (1,3-propanediol, succinic acid) and other products (malic acid, arbutin), etc., which are widely used in intermediates, animal nutrition, daily chemical care, functional food and nutrition, plant nutrition, etc. In 2023, the amino acid/vitamin business grew steadily, achieving revenue of 1,465/ 218 million yuan respectively, up 25.62%/574.96% from 2022; gross margin was 43.32%/55.10%, respectively, up 0.95/18.52 percentage points from 2022. According to Baichuan Yingfu data, the average price of valine products (feed additives) in 2023 was 214,600 yuan/ton, falling to 157,000 yuan/ton in April 2024. The subsequent stabilization of the price of feed additives, combined with the production volume of the company's various projects, is worth looking forward to in the future.

New construction projects continue to be put into production, and the product matrix continues to be enriched. In 2023, according to the plan, the company will advance the construction of projects with an annual output of 50,000 tons of bio-butanedioic acid at the Chifeng base, 50,000 tons of bio-based 1,3-propanediol, and the Qinhuangdao base with an annual output of 50,000 tons of bio-based malic acid; according to annual reports, all of these projects can achieve continuous mass production in 2024. The company's products will also expand from amino acids, vitamins, etc. to new bio-based material monomers, further opening up room for growth. Among them, 1,3-propanediol (PDO) is an important raw material for high-performance polyester fibers such as PTT, and production technology has been monopolized by DuPont of the United States for many years. The company's success in the development and mass production of bio-based 1,3-propanediol has effectively solved the problem of long-term dependence on imports of raw materials, provided strong support for the independence of the domestic PDO-PTT industry chain, and further enhanced the overall competitiveness of the domestic textile and chemical fiber industry.

Investment advice: Based on the product price situation and the company's future production capacity plan, we expect that the company's net profit for 2024-2026 will be 6.08/8.58/1,063 million yuan, and the corresponding EPS will be 3.86/5.44/6.74 yuan, respectively. Corresponding to the current stock price PE is 27.7/19.7/15.9 times, respectively, covered for the first time, giving a “buy” rating.

Risk warning: falling product prices, projects under construction falling short of expectations, fluctuating raw material prices, industry competition increasing risks, etc.