Incident Overview
The company publishes the 2023 Annual Report and the First Quarter 2024 Report. In 2023, the company achieved operating income of 15.117 billion yuan, a year-on-year decrease of 5.13%; net profit to mother of 2.704 billion yuan, a year-on-year decrease of 25.30%; net profit after deducting non-return to mother of 2,614 billion yuan, a year-on-year decrease of 27.12%; and EPS of 0.87 yuan.
In Q1 2024, the company achieved operating income of 4.499 billion yuan, up 24.52% year on year and 9.61% month on month; net profit to mother of 870 million yuan, up 35.21% year on year and 44.21% month on month; net profit after deducting non-return to mother was 857 million yuan, up 46.22% year on year, and 29.21% month on month.
Analytical judgment:
The decline in nutritional product prices put pressure on the 2023 performance. 2024Q1 performance improved month-on-month 1) In 2023, prices of major vitamin products declined. According to Baichuan Yingfu data, the average price of vitamin A/vitamin E/methionine products in 2023 was 8.47/7.00/18,700 yuan/ton, respectively, down 47.13%/16.67%/10.53% year-on-year, respectively. The company made up prices by volume. The pharmaceutical and chemical sector's output was 789,700 tons, up 18.03% year on year, and sales volume was 789,200 tons, up 20.36% year on year. 2) Gross margin declined slightly in 2023, and expenses increased during the period: in 2023, the company's gross margin was 32.98%, a year-on-year decrease of 3.96pct. Among them, the gross margin of nutritional products was 29.91%, a year-on-year decrease of 6.68pct, and the gross profit margin of fragrance products was 50.51%, up 1.5 pcts year-on-year. In 2023, the company's sales/management/ R&D/finance expenses ratio was 1.05%/3.65%/7.42%/0.65%, respectively. The company increased its marketing efforts, and sales expenses increased 29.49% year-on-year, mainly due to the increase in personnel remuneration, commissions and office expenses. 3) Profitability improved month-on-month in the first quarter of 2024, and gross margin increased: In 2024, the company's gross sales margin was 35.04%, up 3.59pct month-on-month, improving profitability. According to Baichuan Yingfu, the current average market prices for vitamin A/vitamin E/methionine are 8.40/6.75/21,900 yuan/ton, respectively, up 13.06%/12.50%/0.05% from the beginning of the year, respectively. We believe that the rise in the prices of vitamins and methionine will raise the company's profit level.
The development of new production capacity is progressing in an orderly manner, and we are optimistic about the company's future growth
1) The advantages of the nutrition sector continue to be reflected: Of the 250,000 tons/year methionine phase II project, the 100,000 ton installation process line was opened at once to enhance the company's nutritional sector strength. In addition, the 180,000 tons/year liquid methionine (pure) project jointly built by the company and China Petroleum & Chemical Corporation was put into construction, and the annual output of 4,000 tons of cystine has already started. 2) Accelerated layout of the new materials sector: The 7,000 tons/year PPS phase III project progressed smoothly, the project approval was carried out in an orderly manner, and the HA project has been put into trial. Currently, the production capacity of each product in the HA project is 20,000 tons, the annual production capacity of IPDA products is 20,000 tons, the annual production capacity of IPDI products is 1,000 tons, and the polymers are 3,000 tons. 4) The pharmaceutical raw materials sector is gradually developing: Currently, pharmaceutical-grade Q10 has been launched, and the product structure has been upgraded according to market demand.
Investment advice
We updated our profit forecast. We expect the company's 2024-2026 revenue to be 180.09/197.56/21,700 billion yuan, respectively, net profit to mother of 40.69/46.43/5.142 billion yuan, and EPS of 1.32/1.50/1.66 yuan respectively, corresponding to the closing price of 19.73 yuan on May 8, PE is 15/13/12 times, respectively, maintaining the “gain” rating.
Risk warning
The risk that the construction progress of new projects falls short of expectations, the risk of increased competition in the industry, etc.