Net profit to mother in '23 was +40.32% YoY, and 24Q1 net profit was +6.62% YoY. In 2023, the company achieved operating income of 1,938 million yuan, +36.63% year over year; realized net profit of 449 million yuan, +40.32% year over year; realized deducted non-net profit of 438 million yuan, +44.28% year over year. With 2023Q4, the company achieved operating income of 574 million yuan, +32% year over month, +12% month on month; realized net profit of 129 million yuan, +25% year on month, 0% month on month; realized deducted non-net profit of 123 million yuan, +22% year over month, and -2% month on month.

The company plans to distribute a total cash dividend of 141 million yuan (tax included) in 2023, accounting for 31.47% of net profit attributable to mother. With 2024Q1, the company achieved operating income of 501 million yuan, +25% year over month, -13% month on month; realized net profit to mother of 86.5741 million yuan, +7% year on month, and -33% month on month; realized deduction of non-net profit of 859.07 million yuan, +10% year over month and -30% month on month.

Continue to increase R&D investment and build an efficient and open R&D system. In 2023, the company will continue to increase investment in R&D, introduce high-end R&D talents, improve the company's synthetic biology R&D platform, and strive to build an internationally leading technology research and development center. In terms of the organizational structure and construction of the R&D system, the company optimized the organizational structure of the research institute and established an efficient R&D management system to ensure the effective allocation of resources and the smooth progress of R&D projects. Huaheng Synthetic Biology Research Institute has established three core R&D and R&D management centers/platforms, namely the Systems and Synthetic Biology Center, the Fermentation and Enzyme Engineering Center, and the Intellectual Property Center. In 2023, the company applied for 42 new invention patents and 9 new utility model patents.

Promote the construction of new product projects with high quality and expand the company's product matrix. In 2023, according to the plan, the company will advance a project to build a production base with an annual output of 50,000 tons of biobased succinic acid and raw materials for biobased products at the Chifeng base, a construction project with an annual output of 50,000 tons of bio-based 1,3-propanediol, and a construction project with an annual output of 50,000 tons of bio-based malic acid at the Qinhuangdao base. All of the above projects will achieve continuous mass production in 2024. The company's product technology will also be expanded from amino acids, vitamins, etc. to new bio-based material monomers, further opening up space for the company's business growth.

Promote international development strategies and enhance the ability to serve global customers. In 2023, the company will continue to promote an international development strategy, continue to upgrade the original marketing organization system, further enhance the company's overall product planning and product capabilities, and optimize sales management in customer regions. The company strengthened its control over customer regional sales management through detailed market analysis and sales strategies. The company actively recruits overseas sales talents with local market experience to meet the specific needs of different regional markets and enhance the company's insight into the international market.

Launch excellent manufacturing projects and build first-class biomanification capabilities. In 2023, the company launched the Production Base Excellence Manufacturing (HPAM) project and introduced the world's most advanced operation management system WCM (WorldClass Manufacturing). Since the launch of the project, the company has specially set up an external professional consulting agency and internal expert team to actively integrate resources, optimize the system, and quickly fully promote it in the company's four major production bases. At present, Huaheng's excellent intelligent manufacturing system has been initially established.

Profit forecast. We expect the company's 2024-2026 net profit to be $623, 8.50, and $1,145 million, respectively. Referring to companies in the same industry, we gave the company 33-35 times PE in 2024, with a corresponding reasonable value range of 130.35-138.25 yuan, maintaining a “superior to the market” rating.

Risk warning. Macroeconomic cycle; production safety expectations; raw material price fluctuations.