The company released its 2023 annual report. In 2023, it achieved revenue of 15.117 billion yuan, down 5.13% year on year; realized net profit of 2.704 billion yuan, down 25.30% year on year; of these, 23Q4 achieved revenue of 4.104 billion yuan, up 2.00% year on year, up 14.21% month on month; realized net profit of 603 million yuan, down 1.02% year on year and 2.42% month on month. The company released its 2024 quarterly report. In 24Q1, it achieved revenue of 4.499 billion yuan, a year-on-year increase of 24.54%, and a month-on-month increase of 9.61%; net profit to mother was 870 million yuan, an increase of 35.21% year-on-year and 44.21% month-on-month. The company plans to distribute a cash dividend of 4.50 yuan for every 10 shares to all shareholders. Optimistic about performance growth brought about by rising vitamin and methionine prices. New projects continue to advance and maintain purchase ratings.
Key points to support ratings
24Q1 results increased year over month. In 2023, the company's revenue and net profit declined year on year, with gross margin of 32.98% (-3.96pct year on year) and net margin of 18.03% (year-on-year -4.80 pct). The main reason was the decline in vitamin prices for the company's main product in 2023.
The company's expense ratio for the 2023 period was 11.00% (+1.39 pct year over year), of which the sales expense ratio was 1.05% (+0.28 pct year over year), mainly due to an increase in personnel remuneration, commissions and office expenses; the financial expense ratio was 0.43% (+0.15 pct year over year), mainly due to a decrease in interest income and exchange income; management expense ratio 3.65% (+0.48 pct year over year); R&D expenses rate 5.87% (+0.48 pct year over year). The 24Q1 company's revenue and net profit to mother both increased year on month, with gross profit margin of 35.04% (+3.35 pct year on year, +3.60 pct month on month), net profit margin 19.40% (+1.49 pct year on year, +4.63 pct month on month), and profitability improved year on month.
The decline in vitamin and methionine prices in 2023 affected the performance of the nutrition sector, and product prices rose in 2024. In 2023, the company's nutrition sector achieved revenue of 9.867 billion yuan (-9.91% year over year) and a gross profit margin of 29.91% (year-on-year -6.68 pct). The main reason was the inertial release of production capacity in the vitamin industry in 2023, the oversupply situation intensified, industry competition was intense, and the downward pressure on vitamin product prices was strong. According to iFind, the average price of vitamin A in 2023 was 84.48 yuan/kg (-48.44%), and the average price of vitamin E was 70.53 yuan/kg (-17.76%); on May 23, 2024, the unit price of vitamin A was 88.00 yuan/kg (+21.28% compared to the beginning of the year), and the unit price of vitamin E was 69.00 yuan/kg (+16.95% compared to the beginning of the year). According to Baichuan Yingfu, the average price of methionine in 2023 was 18.70 yuan/kg (-10.61% YoY), and on May 24, 2024, the unit price of methionine was 21.82 yuan/kg (+2.15% compared to the beginning of the year). The rise in vitamin and methionine prices is expected to boost the company's performance in the nutrition sector. According to the 2023 annual report, of the 250,000 tons/year methionine phase II project in the company's nutrition sector, the 100,000 ton plant was running smoothly, and the 150,000 ton plant process route was completed at once; the company and China Petroleum & Chemical Corporation jointly built a 180,000 tons/year liquid methionine (pure) project to be put into construction; 4,000 tons/year construction of the 4,000 tons/year taurine project started; normal production and sales of the 2,500 tons/year vitamin B5 project.
The company continues to consolidate its advantages in the flavors and fragrances, new materials and APIs. In terms of flavors and fragrances, the company's flavor and fragrance segment achieved revenue of 3.274 billion yuan (+10.34% year over year) and a gross profit margin of 50.51% (+1.54 pct year over year) in 2023. According to the 2023 annual report, the company currently mainly produces various fragrances such as linalool series, citral series, xylitol series, methyl dihydrojasmonate, raspberry ketone, virginal aldehyde, menthol, etc. The products are widely used in personal care, home care, cosmetics and food, and are an important supplier to the global fragrance and fragrance industry; the 5,000 tons/year menthol project was normally produced and sold in 2023. In terms of new materials, the company's polymer materials achieved revenue of 1.02 billion yuan (+3.04% year over year) and gross profit margin of 27.73% (+5.08 pct year on year) in 2023. According to the 2023 annual report, the company has now built the entire PPS industry chain from basic raw materials to polymer, to modified processing, to special fibers, and has become the only domestic enterprise that can stably produce fiber grade, injection molding grade, extrusion grade, and coating PPS; the 2023 7,000 tons/year PPS phase III project was produced and sold normally, the adiponitrile project was successfully tested, and the project approval progressed in an orderly manner. In addition, according to the 2023 annual report, pharmaceutical-grade Q10 was launched in the APIs sector, and the product structure was upgraded according to market demand, and the company gradually developed into a manufacturer of antipyretic analgesics, nutritional drugs, and specialty APIs.
valuations
Considering that vitamin and methionine prices are still recovering in 2024, in the long run, the prosperity of the vitamin and methionine industry is expected to increase as the supply and demand pattern is optimized, and profit forecasts are adjusted. The company's earnings per share for 2024-2026 are expected to be 1.20 yuan, 1.45 yuan, and 1.71 yuan respectively, corresponding to PE 15.7 times, 13.1 times, and 11.1 times, respectively. Optimistic about performance growth brought about by rising vitamin and methionine prices. New projects continue to advance and maintain purchase ratings.
The main risks faced by ratings
Product prices fluctuated greatly; project commissioning progress fell short of expectations; downstream demand fell short of expectations.