The company achieved steady growth in revenue and net profit in 2023 and 2024Q1, and the systematic production capacity layout for major business segments such as enzyme preparations, microecology, and animal insurance was basically completed. The company's revenue in 2023 was +3.07% YoY to 1,199 million yuan, net profit to mother +15.56% YoY to 81 million yuan; 2024Q1 revenue +23.32% YoY to 287 million yuan, and net profit to mother +20.45% YoY to 13 million yuan. The company adheres to the technological innovation strategy and is committed to building an industrial bioplatform company driven by technological innovation and globalization. In 2023, R&D investment reached 111 million yuan, accounting for 9.23% of revenue, and is at a high level in the industry. At the same time, the company's systematized production capacity layout for major business segments such as enzyme preparations, microecology, and animal protection has also been basically completed. The Blue Biotechnology Center, the Microecological Formulation Project for Plants, and the Animal Protection Industrial Park have all been put into production and operation; the Weifang Kangdien refined enzyme series product production line construction project is under smooth preparation and is expected to be put into operation in December 2024. We expect that the comprehensive strength of the company's products, production capacity, channels, etc. may be further enhanced after the new production capacity is put into operation, and we are optimistic about the company's future development.

Continue to improve the animal health system and form a comprehensive enabling platform for “industry+service”. The company's VLAND-PCP customized enzyme solution (accurate customization based on the feed enzyme application big data system) platform has accumulated hundreds of enzyme databases for feed ingredients and is continuously updated. It can effectively solve the problems of digestion, absorption and processing of different raw materials, improve feed conversion efficiency, enhance livestock and poultry growth performance, provide system solutions for users to reduce costs and increase efficiency, and customer recognition continues to increase. In August 2023, the company completed the acquisition of 51% of Runbote's shares. Runbote has a rich heritage in antibiotic substitution, especially tannic acid research. It appropriately complements the company's enzymes, probiotics, and Chinese herbal medicines to form a complete system of antibiotic substitution, which will effectively improve the Azure Animal Health System and enrich the company's product matrix.

Feed replacement+raw material substitutation+large-scale farming, the company's main business is expected to benefit from market expansion. We believe that from the top down, demand for anti-substitution products is increasing after the implementation of the anti-feed anti-resistance policy. Currently, mainstream anti-substitution programs focus on the combined application of enzyme preparations, microecological preparations, and medicinal plant extracts. At the same time, in recent years, due to the high price of feed raw materials, the development of novel soy protein substitutes has further promoted the development of enzyme preparations, and the company is expected to benefit from market expansion in the future. Looking from the bottom up, the company has established a leading position in the field of enzyme preparations and microecology through continuous R&D investment and core technology breakthroughs, and the current sales model is mainly direct sales. Relying on technology and product advantages, it is expected to share the dividends of scale growth in the large-scale farming process.

Risk warning: the risk of large-scale uncontrolled livestock and poultry outbreaks, the risk of fluctuations in raw material prices.

Investment advice: The company is a leader in enzyme preparations, and the growth margin is expected to gradually open up. Considering the high fluctuation and uncertainty of the downstream aquaculture market, we lowered our 2024-2025 profit forecast. The company's 2024-2026 net profit is expected to reach 0.85/0.91/97 billion yuan (originally estimated net profit for 2024-2025 was 133/136 million yuan, respectively), corresponding EPS was 0.34/0.36/0.38 yuan, and PE was 41/39/37 times, respectively, maintaining the “increase” rating.