Description of the event
In 2023, the company achieved revenue of 1.94 billion yuan (+36.6% YoY), realized net profit of 450 million yuan (+40.3% YoY), and realized non-net profit of 4.4 billion yuan (+44.3% YoY). Among them, Q4 achieved revenue of 570 million yuan in a single quarter (+32.0% YoY, +11.6% month-on-month), realized net profit of 130 million yuan (+25.4% YoY, +0.3% YoY), and realized non-net profit of 120 million yuan (+21.7% YoY, -1.9% YoY). With 2024Q1, the company achieved revenue of 500 million yuan (+25.1% YoY, -12.8% YoY), realized net profit of 87 million yuan (+6.6% YoY, -32.9% YoY), and realized non-net profit of 86 million yuan (+9.7% YoY, -30.2% YoY). A cash bonus of $9.0 (tax included) is distributed for every 10 shares.
Incident comments
The benefits of adding L-valine and inositol in 2023 are relatively good. The company's amino acid sector achieved operating revenue of 1.47 billion yuan (+25.6% year over year) and achieved gross profit margin of 43.3% (+0.95pct year over year). According to Boya Hexun, the average price of valine in 2023 was 22.7 yuan/kg, down 2.0% year on year. Although the price of valine products decreased slightly throughout the year, L-valine fundraising capacity continued to increase, and product production and sales were strong, leading to a significant increase in revenue in the amino acid sector. At the same time, with continuous optimization of company costs, the gross margin of the amino acid sector increased slightly. Bayannaoer is the main production base for valine. In 2023, Bayannaoer Huaheng achieved operating income of 800 million yuan (+57.7%) and net profit of 250 million yuan (+39.4% year over year). The vitamin sector achieved operating revenue of 210 million yuan (+575.0% year over year) and achieved a gross profit margin of 55.1% (+18.5pct year over year). Thanks to the amount of inositol released in new products, the vitamin sector achieved relatively rapid growth. In 2023, the company achieved a gross sales margin of 40.5% (+1.9pct year over year) and a net sales margin of 23.0% (+0.5pct year over year).
Prices of some of 2024Q1's products have declined. According to Boya Hexun, due to the decline in soybean meal and corn, and the release of new production capacity in the industry, the price of 2024Q1 valine fell month-on-month compared to 2023Q4. The average price of 2024Q1 valine was 15.5 yuan/kg (-16.1% month-on-month), but the price has now basically stabilized. The average price of 2024Q1 inositol is 60.1 yuan/kg (-29.6% month-on-month), which is currently stable. Due to falling prices of existing products, 2024Q1 achieved a gross sales margin of 33.6% (-5.1pct) and a net sales margin of 17.1% (-5.0pct month-on-month).
The company continues to recommend the construction of new varieties, which is expected to rise to the next level. The company invested 110 million yuan in R&D throughout 2023, accounting for 5.6% of revenue. The company continues to increase R&D investment, introduce high-end R&D talents, improve the company's synthetic biology R&D platform, and is committed to building an internationally leading technology research and development center. The projects under construction at 2024Q1 are worth 1.68 billion yuan. The projects under construction include the Chifeng base “production base project with an annual output of 50,000 tons of biobased succinic acid and biobased product raw materials” and the “construction project with an annual output of 50,000 tons of biobased 1,3-propanediol”, the “construction project with an annual output of 50,000 tons of bio-based malic acid” at the Qinhuangdao base, and the “construction project with an annual output of 25,000 tons of valine, arginine and inositol with an annual output of 1,000 tons” at the Chifeng base. The company promoted the construction of the above projects according to the plan. The project team created a new “Huaheng Speed” with the highest construction quality and shortest construction cycle. In 2024, all of these projects will achieve continuous mass production. With the orderly release of production capacity, economic benefits are expected to gradually become apparent.
The company is a leading biological manufacturing enterprise, and product technology barriers are high. On the basis of providing a moat for existing products, the product line is continuously enriched to contribute to growth. The net profit attributable for 24-26 is estimated to be 6.5, 9.7 billion yuan, and 1.19 billion yuan, maintaining the “buy” rating.
Risk warning
1. The market expansion of new products falls short of expectations;
2. The existing product industry has expanded production a lot.