The sharp rise in methionine volume and price helped restore Q1 performance and promote project construction in an orderly manner to release the 2024 quarterly report, achieving revenue of 4.499 billion yuan, +24.5% year-on-year and +9.6% month-on-month; net profit to mother of 870 million yuan, +35.2% year-on-year and +44.2% month-on-month; deducted non-net profit of 857 million yuan, +46.2% year-on-year and +29.2% month-on-month. The company's 2023 performance was pressured by the fluctuation in prices of nutritional products such as vitamins, and weak demand on the farming side. The orderly release of methionine, fragrance, and polymer materials projects helped the company to steadily recover its 2024Q1 performance, demonstrating the profitability of leading fine chemical companies. Considering that the price of nutritional products is still under pressure, we lowered the 2024-2025 profit forecast and added the 2026 profit forecast. The net profit for 2024-2026 is 39.01 (-5.51), 45.25 (-8.52), and 5.202 billion yuan, corresponding EPS is 1.26, 1.46, and 1.68 yuan/share, and the PE corresponding to the current stock price is 15.0, 12.9, and 11.2 times. We are optimistic that the company will adhere to the main channels of “chemical +” and “bio+” strategies, adhere to innovation drive, advance project construction in an orderly manner, and maintain a “buy” rating.
Supply disturbances led to a downward rise in nutritional product prices. In terms of sufficient projects under construction and profits expected to steadily restore profitability, the gross profit margin and net margin of 2024Q1 sales were 35.04%/19.40%, respectively, +3.35/+1.49pcts year-on-year, and +3.60/+4.63pcts month-on-month, respectively. According to Wind data, as of April 30, the average annual prices of VA (500,000 IU/g), VE (50% powder), VD3 (500,000 IU/g), biotin 2%, VB6 (98%), and methionine were 82.6, 65.8, 56.5, 33.6, 146.9, and 21.8 yuan/kg, respectively, +13%, +7%, +0%, -8%, +1%, and +3%, respectively. According to Feed Baba's official account, companies such as BASF, DSM, Ningxia Ziguang, Evonik, and Xinhe Cheng all have plans to stop production and repair or withdraw from the market for vitamins or methionine in 2024. According to the 2023 annual report, the company's methionine project with an annual output of 250,000 tons has been completed (the subsidiary Shandong Amino Acid's net profit in 2023 is 1.06 billion, net profit margin is 27.3%, and profitability is impressive), 180,000 tons/year liquid egg (pure) has been put into construction; construction of 4,000 tons/year cysteine has started; pilot testing of the adipitrile project is progressing smoothly; the HA project is progressing smoothly; pharmaceutical grade Q10 is on the market. We believe that with the gradual optimization of the supply and demand pattern, the vitamin and methionine industry is expected to recover, the company's project reserves are sufficient, and the increase in new production capacity will help to steadily recover profits.
Risk warning: Project progress falls short of expectations, nutritional product prices continue to decline, exchange rates fluctuate greatly, etc.