occurrences
The company released its semi-annual report. 2024H1 achieved operating income of 9.845 billion yuan, +33% year-on-year, and realized net profit to mother of 2.204 billion yuan (higher than the median value of 2.151 billion yuan in the semi-annual report forecast), +49% over the same period last year.
The nutritional product boom resonated, and the performance reached the cutting edge of the forecast
Looking at a single quarter, 2024Q2 achieved revenue of 5.346 billion yuan, +40% year over year; realized net profit of 1.335 billion yuan (higher than the forecast median value of 1.281 billion yuan), +53% month-on-month and +59% year-on-year. By entity, the net profit of the core subsidiaries Shandong Xinhecheng Amino Acid Co., Ltd. /Shandong Xinhecheng Vitamin Co., Ltd. and Shandong Xinhecheng Pharmaceutical Co., Ltd. reached 1.18/0.57/0.67 billion yuan respectively in the first half of the year, +161%/+38%/+12%, respectively.
The sharp increase in performance in the first half of the year was mainly due to the rise in the vitamin boom and the release of 300,000 tons of methionine production capacity. The average price of 2024H1VA/VE was 84/68 yuan/kg, respectively, -6%/-9% year-on-year, but the price trend was upward, and the instantaneous price reached 88/79 yuan kg at the end of June. The average price of 2024H1 methionine was 21.7 yuan/kg, +26% year-on-year.
The vitamin boom is rising widely, and methionine is expected to rise steadily
Vitamin demand improved markedly in the first half of this year. VA/VE exports increased 17%/30% year over year, respectively, and pig prices continued to rise. An explosion occurred at BASF at the end of July. The announcement stated that “the VA/VE device will be restarted no earlier than January of the following year, and it will still take at least a few months to ensure business as usual”, and the VA/VE market price accelerated. As of August 22, it had reached 330/163 yuan/kg respectively, +355%/+173% from the beginning of the year. Methionine prices declined slightly during the off-season in July-August, but prices are expected to rise steadily as the Q4 peak season approaches.
Methionine and adiponitrile businesses contribute to high growth
The company's methionine business is low cost and large. Currently, 0.3 million tons of solid methionine are under construction, and a 0.18 million ton liquid methionine joint venture project is under construction, and the 0.15 million ton methionine production line in Shandong will be expanded to 0.22 million tons. The scale advantage is expected to expand further. Furthermore, the adiponitrile project has now been successfully piloted. The company plans to invest 0.5 million tons of adiponitrile production capacity in installments, which is expected to conform to the trend of localization in the nylon 66 industry chain and open up room for the company's growth.
The economy has improved and continued to innovate and grow. Considering the rapid recovery in vitamin performance, we expect the company's 2024-2026 revenue to be 20.9/26/27.7 billion yuan, respectively, with year-on-year growth rates of 38%/24%/6%, and net profit to mother of 5.7/8/8.6 billion yuan, respectively. The year-on-year growth rates are 110%/39%/8%, EPS is 1.84/2.56/2.77 yuan/share, and the 3-year CAGR is 47%. The current price is 10.4 times PE in 2024. Considering the continuous improvement in the company's vitamin business and the rapid growth in the methionine and new materials business, we maintain the company's “buy” rating.
Risk warning: Risk of sharp drop in methionine and vitamin prices, risk of deteriorating competitive landscape, risk of production capacity under construction falling short of expectations, risk of production safety