Report guide

The company released its 2024 mid-year report, achieving revenue of 1.067 billion yuan, a year-on-year decrease of 4.81%; net profit to mother of 0.345 billion yuan, up 4.61% year-on-year; net profit after deducting non-return to mother of 0.329 billion yuan, an increase of 3.73% year-on-year. Among them, 24Q2's single quarter revenue was 0.572 billion yuan, up 5.47% year on year, up 15.70% month on month; net profit to mother was 0.198 billion yuan, down 10.72% year on year and up 33.93% month on month; net profit without return to mother was 0.193 billion yuan, down 10.40% year on year, up 41.50% month on month, and the performance exceeded our previous expectations.

Key points of investment

Prices of VB1 and VB6 rose, and Q2 profits continued to increase month-on-month

According to Boya Hexun, the average prices of VB1, VB6, folic acid, and biotin in 24Q2 were 171, 150, 183, and 33 yuan/kg, respectively, with year-on-year changes of +51.3%, +15.6%, -8.8%, and -19.8%, respectively, and +14.4%, +3.4%, +0.1%, and -2.7%, respectively. 24Q2 Group B vitamin revenue was 0.48 billion yuan, up 3.08% year on year and 17.4% month on month. Thanks to price increases in VB1 and VB6, the gross margin of B vitamins increased 8.37pct year-on-year to 48.24% in the first half of the year. 24Q2's gross sales margin was 43.78%, up 0.98 pct year on year and 3.71 pct month on month; net sales margin was 34.54%, down 6.27 pct year on year, up 4.70 pct month on month. The company's Q2 net interest rate increased significantly from month to month, mainly due to an increase in exchange earnings and interest income in Q2, which reduced financial expenses by about 26 million yuan. On August 30, the prices of VB1\ VB6\ VD3 were 200\ 160\ 265 yuan/kg respectively, up 9.6%, 6.7%, and 211.8% respectively from the end of June. Price increases for major products are expected to drive the company's profitability further.

Multiple projects are progressing steadily, and product line extension is expected to accelerate growth

As of 24H1's construction project of 0.514 billion yuan, the company is currently mainly constructing 1,000 tons of VA, 7,000 tons of VB5, and 0.06677 million tons of fine chemicals projects in Ningxia. Among them, 3000 tons of VB5 phase I have been mass-produced, 500 tons of VA phase 1 are expected to reach the intended state of use by the end of 24, and the Ningxia fine chemicals project is expected to be put into operation in 2026. With the implementation of the above project, on the one hand, it continues to expand the company's product categories, and on the other hand, it extends upstream to guarantee the supply of raw materials for existing vitamins, which is optimistic about the company's long-term growth.

Profit forecasting and valuation

The prices of the main products VB1 and VB6 rose, raising the company's 24-26 net profit forecast to 0.693/0.795/0.913 billion yuan, respectively. The current price corresponding PE is 16.07/14.01/12.20. The company is a leader in B vitamins. Prices for major products are rising. Furthermore, new production capacity for new products is gradually being implemented, and the company's performance is expected to gradually improve and maintain a “buy” rating.

Risk warning

Risk of vitamin price fluctuations; risk of new production capacity being released less than expected; risk of fluctuating raw material prices.