Event: the State Administration of Market Supervision recently issued a letter on the investigation of illegal operation of "non-aging drugs", which made it clear that nicotinamide single nucleic acid (NMN) could not be produced and sold as food in China, and required a comprehensive investigation of the relevant operators. The document points out that the main ingredient of "anti-aging medicine" is nicotinamide single nucleic acid (NMN) or produced with it as raw material, and some of them exist in common forms such as tablet-pressing candy, mainly promoting the functions of "anti-aging, repairing DNA, preventing Alzheimer's disease," and so on. At present, NMN is not licensed for drugs, health food, food additives and new food raw materials in China, that is, NMN can not be produced and sold as food in our country.
Jindawei's NMN products are produced abroad and then sold through cross-border e-commerce, is a legal compliance operation, market supervision and inspection is good for the development of the industry for a long time. According to Jindawei, the company has not received the relevant regulatory notice, its NMN products are legal compliance, this incident has no impact on the company's production and operation. We believe that the issuance of the document by the State Administration of Market Supervision is a good measure to regulate the domestic NMN market, which can allow small domestic manufacturers operating illegally to withdraw and rectify the market chaos. It is good for Jindawei, and consumers will then be more inclined to choose formal big brands, which will promote the company to shape its brand strength and enhance its influence.
The company issued a performance forecast for 2020 that last year it realized a net profit of 901 million yuan to 1.082 billion yuan, an increase of 100 percent over the same period last year, and a net profit of 825 million yuan to 1.005 billion yuan after deducting non-recurring profits and losses, an increase of 110 percent over the same period last year. The main reasons for the big increase in profits last year are as follows: 1) the price of coenzyme Q10 products increased, while the unit cost decreased, and the company's gross profit margin increased; 2) the sales volume and profit contribution of nutrition and health food increased, and the epidemic had a positive effect on the health products business, and the company also strengthened online and offline sales and brand building and promotion, achieving higher growth; 3) goodwill impairment is expected to decrease in 2020 compared with the same period last year. In the performance forecast, even if it is calculated according to the provision for impairment of VitaBest's remaining goodwill and intangible assets, the amount of impairment is still significantly lower than that of the same period last year.
Investment suggestion: Jindawei is one of the major global vitamin A suppliers, coenzyme Q10 market share is expected to be more than 60%, health products have the whole industry chain, the strategy is optimistic about the development of NMN, the company will continue the dual main business model of "manufacturing + brand operation" in the future. It is estimated that the company's EPS from 2020 to 2022 will be 1.65,2.07,2.60 yuan, corresponding to PE 18.4,14.6 and 11.6 times respectively, maintaining a "highly recommended" rating.
Risk hints: market expansion is less than expected, downstream demand is lower than expected, product prices fall sharply, raw material prices fluctuate sharply, the risk of environmental protection, the risk of production safety, and the impact of domestic industry regulatory policies on the company's operation. NMN products account for a very low proportion of the company's sales and do not have a significant impact on the company's current performance. The effectiveness of the company's NMN products has not been evaluated by FDA and is not used to diagnose, treat, cure or prevent any disease.