Brief performance review
On April 29, 2024, the company released its report for the first quarter of 2024. The company achieved operating income of 4.499 billion yuan in the first quarter, up 24.54% year on year and 9.6% month on month; net profit to mother was 870 million yuan, up 35.21% year on year and 44.2% month on month.
Management analysis
Prices of core products have rebounded, and the company's performance has begun to recover. Product prices in the company's nutrition business segment began to pick up. According to Boya Hexun data, the average market prices for vitamin E, vitamin A, vitamin C, and methionine in the first quarter of this year were 65, 81, 25, and 22 yuan/kg, respectively. The year-on-year changes were -13%, -9%, +8%, and +21%, respectively; the price increases compared to the fourth quarter of last year were 6%, 12%, 25%, and 3%, respectively. As product prices picked up, the company's profitability also began to improve. In the first quarter of 2024, the company's gross sales margin was 35.04%, up 3.4 pct year on year and 3.6 pct month on month; net sales margin was 19.4%, up 1.5 pct year on year, and 4.6 pct month on month.
Focusing on the two major themes of biology and chemistry, new projects are progressing steadily. During the reporting period, the company's original products were operated in a refined manner, and the development and construction of new projects and products was carried out in an orderly manner. Of the 250,000 tons/year methionine phase II project in the nutrition sector, the 100,000 ton plant was running smoothly, the 150,000 ton plant process route was opened at once, and the comprehensive competitive advantage continued to improve; the company and China Petroleum & Chemical Corporation jointly built a 180,000 tons/year liquid methionine (pure) project and put into construction; 4,000 tons/year cysteine construction started; 30,000 tons/year taurine and 2,500 tons/year vitamin B5 projects have all been successfully produced and sold. Normal production and sales of the 5,000 tons/year menthol project in the flavor and fragrance sector; normal volume of the 7,000 tons/year PPS phase III project in the new materials sector; the pilot trial of the adiponitrile project went smoothly, and project approval progressed in an orderly manner; the HA project was put into testing, and the project progressed smoothly. Pharmaceutical-grade Q10 was launched in the API sector, and the product structure was upgraded according to market demand, and gradually developed into a manufacturer of antipyretic, analgesic, nutritional drugs, and specialty API intermediates. With the continuous deployment of production capacity under construction, the company's performance is expected to grow rapidly while the product layout can also be continuously improved.
Profit Forecasts, Valuations, and Ratings
The company is a leading vitamin company. While the nutrition sector has begun to recover upward, construction of new projects continues to help the company grow in the long term. We expect the company's net profit to be 37.1, 42.02, and 4.846 billion yuan respectively in 2024-2026. The current market value corresponds to PE of 15.73, 13.89, and 12.04 times, respectively, maintaining an “increase” rating.
Risk warning
Product prices fell; progress of new projects fell short of expectations; decline in demand