Incident Overview
The company publishes the 2023 Annual Report and the First Quarter 2024 Report. In 2023, the company achieved operating income of 5.311 billion yuan, a year-on-year decrease of 26.75%; realized net profit of 704 million yuan, a year-on-year decrease of 58.46%; realized net profit without deduction of 608 million yuan, a year-on-year decrease of 64.75%; and EPS of 1.27 yuan. In the first quarter of 2024, the company achieved operating income of 1,213 billion yuan, a year-on-year decrease of 12.30%; realized net profit of 129 million yuan, a year-on-year decrease of 47.34%; realized net profit of 121 million yuan without return to mother, a year-on-year decrease of 38.61%.
Analytical judgment:
Sweetener prices have declined, and the company's performance is under pressure in the short term
The company's performance in 2023 declined significantly compared to the same period last year. The main reason was that product prices declined by varying degrees due to industry competition and market demand fluctuations, and the gross margin level also declined significantly. In 2023, the company's food additives/bulk chemicals achieved operating income of 2,890/1,771 billion yuan, a year-on-year change of -36.6%/-13.73%, accounting for 54.40%/33.35% of revenue respectively; the gross margin of food additives/bulk chemicals was 32.76%/10.21%, a year-on-year change of -15.01pct/-4.35pct; sales volume of food manufacturing/basic chemical products increased 15.68%/25.87% year on year. The decline in revenue was mainly due to market factors, food The average price of manufactured products fell in the second half of the year compared to the first half of the year, and the price of basic chemical products continued to be low. According to the company's annual report data, the average sales price of food manufacturing products in 2022 was 128,278 yuan/ton, a year-on-year decrease of 45.20%; the average sales price of basic chemical products was 1,757 yuan/ton in 2022, and the average sales price in 2023 was 1,350 yuan/ton, down 23.16% year on year.
In 2023, the company's management expenses increased by 39.60% year-on-year, mainly due to the increase in share payment fees amortized in the current period.
According to Baichuan Yingfu, prices of major sweetener categories dropped significantly in 2023. The average annual price of sucralose was 167,200 yuan/ton, down 56.05% year on year; acesulfame was 48,200 yuan/ton, down 35.24% year on year; methyl maltol had an average annual market price of 83,000 yuan/ton, down 26.22% year on year; ethyl maltol had an average annual market price of 651,000 yuan/ton, down 26.85% year on year. Due to the continued decline in product market prices, the company's performance in the first quarter of 2024 continued to be under pressure, and both revenue and profit declined year on year. In the first quarter of 2024, the average price of sucralose was 125,000 yuan/ton, down 7.20%; the average price of acesulfame was 38,000 yuan/ton, down 4.04% from the previous month; the average price of methylmaltol was 60,000 tons/ton, down -2.60% from the previous month; and the average price of ethyl maltol was 57,000 yuan/ton, down 3.06% from the previous month.
New production capacity progressed smoothly, entering synthetic biology to help long-term growth in 2023. The company completed the construction work of the main project “Dingyuan Phase II Project”. The theme projects include an annual output of 600,000 tons of sulfuric acid, 60,000 tons of ionic membrane potassium, 150,000 tons of hydrogen peroxide, etc., which are expected to reach trial production conditions one after another in April 2024; the company's sucralose technical improvement project was completed and put into operation. The project carried out technical transformation of the production process to reduce the consumption of some raw materials. Without changing the main raw material, sucrose, the raw material can be used. There are 5000 The production capacity of sucralose in tons/year increased to 6780 tons/year. In addition, in 2023, the company completed the application of D-allodonose-3 differential isomerase, and was successfully approved as a new enzyme preparation for the food industry on February 29, 2024. Relying on a synthetic biology pilot line based on an aloxone sugar device, the company carried out research work on the raw utilization of non-food biobased materials, production of products such as prebiotics, dietary fiber, functional daily chemical fragrances, etc., and continued to improve sweetener application technology and solutions.
Investment advice
We updated our profit forecast. We expect the company's revenue for 2024-2026 to be $54.34/58.99/64.15 billion yuan, respectively, and net profit to mother of 703/8.46/959 million yuan, respectively, and EPS of 1.23/1.49/1.68 yuan respectively. Corresponding to the company's closing price of 25.01 yuan on May 8, PE will be 20/17/15 times, respectively, maintaining the “gain” rating.
Risk warning
The progress of the new construction project fell short of expectations, and risks such as worsening competition; on December 27, 2022, the company received the “Administrative Penalty Decision” issued by the Chuzhou Municipal Emergency Management Bureau.