Key points of investment:
With innovative process technology, industrial collaboration and competitive product costs, the company's methionine business expanded rapidly; at the same time, the low vitamin boom once again verified the cost advantages and profit resilience of the company's vitamin business; the fragrance and new ingredients business collaborated organically with the main nutritional products industry.
The company is an international leading enterprise in the field of fine chemicals
The company is headquartered in Xinchang, Zhejiang, and focuses on the field of fine chemicals, with animal nutrition products such as vitamins and methionine as its business pillar, and also in the fragrance and new materials business. The company's main production bases are located in Xinchang, Zhejiang, Shangyu, and Weifang, Shandong. It currently has production capacity of 60,000 tons of VE, 10,000 tons of VA, and 300,000 tons of solid methionine. Another 180,000 tons of liquid methionine are under construction, and the adiponitrile project is underway.
The bottom of the vitamin boom shows the company's profit resilience
Supply in the vitamin industry is concentrated. The global CR4 of VA and VE reached 81% and 80% respectively in 24, but the industry has abundant production capacity, the overall supply and demand trend is relaxed, and the overall vitamin boom is sluggish. The company is a leading enterprise in the vitamin industry. It is equipped with key intermediates such as citral and linalool, and collaborates with the product industry chain such as essences, fragrances, and IPDA, a new material. The cost advantage is obvious, and the sluggish economy is even more profitable and resilient.
Methionine business costs are low and the increase is large
Methionine is a type of feed additive that is just needed, but the preparation process is highly toxic and complicated, technical barriers are high, and supply is concentrated but relatively loose. After years of price wars, global CR4 has reached 73% in 24, and the methionine pricing logic is expected to shift to oligopoly pricing. After more than 10 years of research, the company's methionine project has now achieved rapid production results. Not only is the single-ton investment competitive, but the industrial chain also collaborates with new materials such as IPDA and adiponitrile. The company's methionine business is low cost and growing at a high rate, and it is expected to create another new company.
The layout of flavors, fragrances and new materials is reasonable
The company has a deep understanding of the fine chemical industry and is good at co-producing various target products with intermediates. The fragrance, fragrance and new materials business is a full reflection of related capabilities, which not only saves project construction costs, but also dilates the costs of the entire nutritional product industry chain. It is also expected that relevant advantages will be replicated in agrochemicals and other fields in the future.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2024-26 to be 190/221/25.4 billion yuan, respectively, with year-on-year growth rates of 25%/17%/15%, respectively, and net profit to mother of 45/58/72 billion yuan, respectively, with year-on-year growth rates of 67%/29%/23%, EPS 1.46/1.88/2.32 yuan/share, respectively, and a 3-year CAGR of 38%. Considering that the company's vitamin business is profitable and the methionine business is growing rapidly, and referring to the 24-year average valuation of 23 times that of the company, we gave the company a 24-year PE target value of 17 times, and the corresponding target price was 25 yuan. For the first time, we covered it and gave it a “buy” rating.
Risk warning: Risk of sharp drop in methionine and vitamin prices, risk of deteriorating competitive landscape, risk of production capacity under construction falling short of expectations, risk of production safety