Incident: The company released its 2024 semi-annual report. During the reporting period, it achieved operating income of 9.845 billion yuan, up 32.7% year on year, net profit of 2.204 billion yuan, up 48.62% year on year, after deducting non-net profit of 2.157 billion yuan, up 56.88% year on year; of these, it achieved revenue of 5.346 billion yuan in a single quarter, up 40.45% year on year, up 18.83% month on month, and net profit of 1.335 billion yuan year on year. 58.88%, up 53.48% month-on-month.
Revenue from the nutrition sector has increased dramatically, and the fragrance business has maintained a steady increase. During the reporting period, the market prices of the company's main products were restored, and the company took more measures to expand its market share, accelerate market development for new products and applications, and achieve a steady increase in sales of major products. At the same time, the company reasonably reduces operating costs through continuous innovation to reduce costs and increase efficiency, optimize production processes, resource allocation, energy consumption, etc., so as to achieve steady growth in business performance. In the first half of 2024, the company's nutritional products achieved revenue of 6.68 billion yuan, a year-on-year increase of 38.30%, a gross profit margin of 35.86%, and a year-on-year increase of 6.98 pct; flavors and fragrances achieved revenue of 1.925 billion yuan, up 17.94% year-on-year, gross profit margin of 49.69%, a year-on-year decrease of 1.79 pcts; and new materials achieved revenue of 0.722 billion yuan, an increase of 24.89% year on year.
Prices of some nutritional products rose year on year, and the BASF accident drove the price of vitamins to rise sharply. In the first half of 2024, the average market prices of VA, VE, and 2% biotin products in the nutrition sector fell 5.7%, 9.6%, and 18.7%, respectively; the average prices in the VD3, VB2, VB6, VB12, VC, and solid methionine markets increased 7.5%, 14.5%, 19.3%, 5.2%, 16.3%, and 25.2%, respectively. The 2024Q2 vitamin market picked up further, and market prices for mainstream products all rose month-on-month. In particular, after the explosion at BASF's Ludwigshafen base in Germany and the announcement of force majeure, VA and VE prices continued to rise sharply, and profits in the company's nutrition sector are expected to increase dramatically.
The development and construction of new projects and new products is progressing in an orderly manner, helping to open up space for future growth. During the reporting period, production capacity in the nutrition sector and methionine project was released, and 0.3 million tons/year production capacity was achieved, and market competitiveness was enhanced; construction of the 0.18 million tons/year liquid methionine (pure) project built by the company and Sinopec progressed steadily; stable production and operation of 4,000 tons/cysteine; and the pilot trial of the glyphosate project went smoothly. The flavor and fragrance sector, a series of aldehyde projects, SA projects, and the first phase of the Fragrance Industrial Park project are progressing steadily. In the new materials sector, PPS applications are developing smoothly in new fields; the EJ project continues to optimize details and promote large-scale production approval; HA project products have been produced and sold normally. In addition, the company plans to invest 10 billion yuan in the construction of a new nylon material project. The first phase of the project plans to invest 3 billion yuan to build a 0.1 million ton/year adiponitrile-hexanediamine project; the second phase of the project plans to invest about 7 billion yuan to build 0.4 million tons/year of adiponitrile-hexanediamine, and extend the construction of a 0.4 million tons/year nylon 66 project on the downstream material side.
Maintain an “overweight” investment rating. Due to the explosion at BASF's Ludwigshafen site in Germany and the announcement of force majeure, vitamin prices have continued to rise sharply. We have adjusted our profit forecast. Net profit from 2024 to 2026 is 5.07 billion yuan, 5.41 billion yuan, 5.62 billion yuan, and EPS is 1.64, 1.75, and 1.82 yuan. The current stock price corresponds to PE of 11.8, 11.0, and 10.6 times, maintaining the “plus” investment rating.
Risk warning: Product prices fall, raw material prices fluctuate, and the commissioning of new projects falls short of expectations.