According to the research report published by Changjiang Securities, vitamin D3 is a small variety in the vitamin industry, mainly used in fodder and other fields. In the long term, with the steady growth of the fodder industry, demand is expected to remain stable. In the short term, the profitability of domestic breeding has improved, downstream acceptance of vitamins has increased, and with the elimination of overseas inventory, the overall export performance of vitamins was also strong in the first half of this year. As the supply of vitamin D3, which is highly concentrated in raw materials, is of high quality, the leading enterprises have greater say in pricing and elasticity. According to Boya Hexun, the supply pattern of vitamin D3 industry is improving to the 59.5th percentile in the past ten years, with slight growth in demand, and prices are expected to gradually rise.

Vitamin D3 is a necessary nutrient for humans and animals.

Vitamin D3 is a trace organic substance that is essential for the growth of humans and animals. Vitamin D3, also known as cholecalciferol, has the most basic function of promoting the absorption of calcium and phosphorus in the intestine, increasing the level of blood calcium and phosphorus, promoting the calcification of bones, and converting into the final active substance 1α,25-hydroxyvitamin D3 to exert physiological effects in the organism.

Demand side: mainly used in feed and other fields, accounting for a relatively low proportion in costs.

Vitamin D3 is mainly used in feed additives, medicinal health care, food additives and other fields. Usually, the addition amount of vitamin D3 per ton of feed is 3.4-6.9g (equivalent to 0.5 million IU/g), and the corresponding cost is expected to be 0.3-0.7 yuan (if the VD3 price is 100 yuan/kg), with a small proportion in the downstream, which can be considered that the downstream feed industry has a lower sensitivity to VD3 prices. In the global animal feed vitamin, amino acid field, different animal feed corresponds to different vitamin D3 addition ratios, and the corresponding demand for vitamin D3 is estimated to be 4,100-8,400 tons. The human body needs to take in an appropriate amount of vitamin D3 through food additives or medical care products. According to estimates, the corresponding demand for vitamin D3 for medical care and food additives worldwide is about 1,900 tons. Therefore, the global demand for vitamin D3 is expected to reach around 10,000 tons. In the long term, with the steady growth of the feed industry, demand will have a stable incremental increase. In the short term, as domestic farming profits improve, downstream acceptance of vitamins improves, and with the digestion of overseas inventory, the overall vitamin exports have shown strong resilience. From January to May 2024, the vitamin industry exported a total of 0.172 million tons, a year-on-year increase of 13.5%.

Supply side: high material barriers, higher industry concentration

The main raw material for vitamin D3 oil is lanolin cholesterol. NF-grade cholesterol (that is, cholesterol with a purity of more than 95%) can be obtained by purification and crystallization of lanolin cholesterol, and vitamin D3 can be further prepared. NF grade cholesterol is mainly controlled by several manufacturers such as Zhejiang Garden Biopharmaceutical, India Dishman, Japan Jinghua, and Singapore Enka. Among them, Zhejiang Garden Biopharmaceutical has a high market share of 57.5%, and the industry CR3 reaches 91.8%. The nominal annual production capacity of vitamin D3 globally is about 0.018 million tons, with a CR3 of 52.5% and CR5 of 74.3%. Only Zhejiang Garden Biopharmaceutical has the upstream core raw material supporting, while other vitamin D3 manufacturers still need to purchase NF-grade cholesterol or vitamin D3 oil for production, leading to differences in cost.

Price: the influence of the supply side is the main factor, and the elasticity was high in history.

Historically, the price of vitamin D3 often rose sharply due to changes in the supply side, and each time the change reflected a greater price elasticity. In 2008-2009, mainly due to the recovery of feed demand, coupled with some plant shutdowns and technological transformations, VD3 ushered in a boom cycle; in 2016-2017, mainly due to environmental protection and supply-side reforms, enterprises raised prices and ushered in a high business cycle; in 2021-2023, after experiencing a low period in the vitamin industry, as vitamin D gradually digests overseas market inventory and domestic demand picks up steadily, the business climate has marginally improved. According to Boya Hexun, as of July 10, 2024, the price of vitamin D3 was 132.5 yuan/kg, an increase of 134.5% from the early price of 56.5 yuan/kg in mid-May. The supply pattern of the vitamin D3 industry is good in the 59.5th percentile of the ten years, and demand is expected to increase slightly, with prices expected to gradually rise.

Investment advice: bullish on the upward trend of VD3 business

Vitamin D3 is a small variety in the vitamin industry, mainly used in the fodder industry. With the gradual digestion of overseas market inventories and the steady recovery of domestic demand, the product demand side has received a marginal upward catalyst. As a high-quality industry with highly concentrated raw material supply, the industry leader has a greater say in the price and has greater elasticity. It is recommended to pay attention to Zhejiang Garden Biopharmaceutical.

Risk warning

1. There is an actual nominal overcapacity in the industry, and there is a possibility of significant increases in corporate production. 2. 25-hydroxyvitamin D3 is a substitute for vitamin D3.