Proposed mid-term dividend of about 0.5 billion yuan+repurchase cancellation of 0.3 to 0.5 billion yuan to maintain the “buy” rating

Meihua Biotech announced on September 23 that the company plans to implement semi-annual profit distribution. It plans to distribute a cash dividend of 1.75 yuan (tax included) for every 10 shares, with a corresponding dividend amount of about 0.5 billion yuan (tax included), and plans to repurchase 0.3-0.5 billion yuan to cancel and reduce registered capital, fully demonstrating the company's confidence in future development. We maintained the forecast of the company's 24-26 net profit of 3.27/3.67/3.94 billion yuan, corresponding to EPS of 1.15/1.29/1.38 yuan. Referring to the same wind expectations of a comparable company's 24-year average of 14xPE, considering the early development of the company's synthetic biology platform but the consolidation of the amino acid scale advantage, we gave the company a 24-year 10xPE valuation with a target price of 11.5 yuan, maintaining a “buy” rating.

An interim dividend was implemented for the first time, and active dividend+repurchase cancellation is expected to help the Value Revaluation Company's semi-annual profit distribution for the first time since the restructuring and listing in 2010. According to the company's announcement, 24H1 has repurchased shares of about 0.284 billion yuan, and the amount of dividends (including repurchases) in the first half of the year accounted for 53.16% of the net profit attributable to the mother. At the same time, the company will use its own funds to repurchase 0.3-0.5 billion yuan to cancel and reduce registered capital. The repurchase will be carried out through centralized bidding. The maximum repurchase price is 12 yuan/share (about 34% premium compared to the closing price on September 23), fully demonstrating the company's confidence in future development. The company has long focused on shareholder returns. The average dividend rate for 16-23 (cumulative dividend/cumulative net profit) is about 55%. It has implemented share repurchases for 5 consecutive years in 19-23, and implemented employee stock ownership plans for 4 consecutive years from 21-24. We believe that maintaining active dividends+repurchases and cancellations will continue to help value revaluation.

The amino acid boom continues to improve, and project growth helps future growth. According to Boya Hexun, the market prices of lysine (98.5%) /lysine (70%) /threonine/monosodium glutam/xanthan gum were 10.6/5.15/10.95/7.27/26.5 yuan/kg respectively, compared with +1%/-6%/+5%/-6%/-2%, 98.5% lysine and threonine benefited from factors such as increased export demand and a good supply pattern. However, the market price of MSG continued to improve, although prices continued to decline. Consider the price drop of raw materials and the company With the advantage of diversified business layout, we expect the company's profits to remain resilient. The company is deeply involved in the “amino acid +” strategy. In the future, synthetic biological products such as 0.5 million tons/year monosodium glutamate in Tongliao, 0.6 million tons/year lysine in Baicheng, and valine/pullulan polysaccharide will gradually fulfill expectations to help future growth.

Risk warning: demand falls short of expectations; the pattern of amino acids and other products deteriorates; progress in new technologies falls short of expectations.