Core views
In the first quarter of 2024, the company achieved revenue of 3.496 billion yuan, a year-on-year increase of 10.90%, achieved net profit of 277 million yuan, an increase of 18512.09% over the previous year, and achieved net profit without deduction of 379 million yuan, an increase of 1756.10% over the previous year. As methionine and vitamin prices continue to rise, the company's profits are expected to continue to improve. At the same time, the company's second plant in Nanjing was successfully put into operation, further enhancing the company's cost advantage, and planning a 150,000 ton solid egg project in Quanzhou to consolidate its methionine position. Furthermore, the company's second pillar continues to advance, revenue is rising steadily, profits are stable, and sales of products such as ruminant products and nutrition and health promotion businesses are growing strongly.
Long-term growth can be expected.
occurrences
The company released its 2024 quarterly report
In the first quarter of 2024, the company achieved revenue of 3.496 billion yuan, a year-on-year increase of 10.90%, achieved net profit of 277 million yuan, an increase of 18512.09% over the previous year, and achieved net profit without deduction of 379 million yuan, an increase of 1756.10% over the previous year.
Brief review
The economy has picked up, product prices have risen, and performance has increased dramatically
In terms of methionine prices, according to Wind, the average price of solid methionine in Q1 in 2024 was 22.25 yuan/kg, +21% year over year, and the average price of liquid eggs was 16.54 yuan/kg, +15% year over year. The overall price increased. In terms of cost, the prices of 95% propylene, methanol, and sulfur, the company's main raw materials in Q1 2024 were -8%, +1%, and -35% year-on-year, respectively. In terms of sales, liquid methionine continues to accelerate market penetration. Thanks to sales growth in major markets such as China, Europe, the Middle East, and Latin America, sales increased sharply by +13% in the first quarter of 2024. At the same time, production costs at liquid methionine plants in Nanjing and Europe have continued to be optimized thanks to lower raw material and energy prices, increased output, and plans to improve operational efficiency. In terms of vitamins, the price of vitamin A continues to be stable, and sales in the vitamin trade category are at a high level. In the first quarter of 2024, the company's functional product revenue was 2,582 billion yuan, up 13% year on year, and gross margin was 28%, a significant increase of 13 pct year on year.
In terms of specialty products, the first quarter of 2024 achieved revenue of 914 million yuan, an increase of 4% over the previous year, and gross margin of 42%, an increase of 4 pcts over the previous year. The main reasons are: 1. Sales of monogastric products have been growing steadily (+5%), mainly due to the strong sales drive of Xili Selenium (+16%), sales growth in mycotoxin management products (+27%), Framelco product line and palatability products, and good sales performance in the Middle East, Latin America, North America and the Asia-Pacific region; 2. Aquatic products sales maintained double-digit sales growth (+16%), with strong sales performance in most regions of the world.
Thanks to the recovery of the company's methionine and specialty products, the company's Q1 performance increased significantly.
Methionine: Demand is growing steadily, and the planning layout of the Quanzhou Solid Methionine Project Methionine is one of the company's two major functional products. Due to factors such as population growth, rising economic standards in developing countries, and the continuous development of modern livestock farming, methionine demand in the Asia-Pacific region, including China, is growing rapidly. Global methionine demand has been growing steadily at a rate of 5% to 6%. Currently, demand has reached 1.6 million tons. On the supply side, production capacity is highly concentrated in the global methionine market. Major manufacturers include Evonik, Adisu, Novus, Sumitomo, etc. The company's production capacity continues to expand in Europe and China. In September 2022, the second phase of the company's Nanjing plant was successfully put into operation, with domestic production capacity increasing to 350,000 tons. At the same time, the company plans to build a solid methionine plant in Quanzhou, with a production capacity of 150,000 tons, which is expected to be put into operation in 2027. Domestic factory production has a clear cost advantage, and with the gradual release of the company's domestic production capacity, profits and market share are expected to increase further.
Special products: Special products are developing rapidly, and long-term space can be expected
Specialty products include rumen coated methionine for ruminants, digestive performance enhancing products (enzyme preparations), products to improve animal health (probiotics, short and medium chain fatty acids, plant extracts and organic selenium), palatability products, mycotoxin management products, feed preservation products for monogastric animals, aquatic product additives, and innovative alternative protein products. Based on strong R&D strength, the company continues to launch new products, and the high added value provided by specialty products is recognized by customers. Since 2014, Adisu has launched a new product or service every year, and plans to generate 20% of the revenue from the new product business by 2026. The company's Nanjing specialty product mixing plant held a groundbreaking ceremony on August 31. It is scheduled to be completed by the end of 2024. The European specialty product upgrading project is being carried out according to the plan, and the new plant will be put into operation in the first half of 2024. Special products can be expected to grow.
Profit forecast and valuation: The company's net profit for 2024-2026 is estimated to be 11.46 billion yuan, 12.89 billion yuan, and 1,414 billion yuan, EPS 0.43, 0.48, and 0.53 yuan, respectively, corresponding to the current stock price PE of 23.5X, 20.8X, and 19.0X respectively. Maintain an “Overweight” rating.
Risk Warning: Macroeconomic Fluctuations (As an international company, the company provides products and services to around 3,900 customers in more than 110 countries or regions around the world.
Business performance, financial status and development prospects will be largely affected by global macroeconomics); fluctuations in raw materials (the main raw materials used by the company include propylene, sulfur, methanol, ammonia and natural gas; the price of the company's raw materials will fluctuate according to policy or market, which will cause the company's product cost to fluctuate. If the sales price of the product does not fluctuate simultaneously, it will cause the company's performance to fluctuate); competition intensifies (the company faces mainly large well-known companies with strong financial resources, which also face competition from many other companies, including new entrants); special products fall short of expectations (As the second pillar of the company's development, there is some uncertainty about product promotion and application. If the plan falls short of expectations, it will affect the company's future growth).