Jinhe Biotech: The leader in the gold mycin industry, the company that continues to expand its animal insurance business is the leader in the gold mycin industry, with an annual production capacity of about 55 thousand tons, accounting for about half of the global production capacity. The scale advantage is very obvious. The company's vision is to become a leading mobile insurance company, providing quality products and services to customers around the world. To achieve this goal, the company is actively developing new varieties and fields such as veterinary chemicals (doxycycline hydrochloride), veterinary vaccines (bovine and sheep bruxism, foot-and-mouth disease vaccines, etc.), and pet medicines. Affected by the domestic feed ban policy in 2020, the company's performance temporarily declined, and there has now been a steady rebound. In the first quarter of 2021, the company achieved operating income of 4.6 billion yuan, an increase of 6.7% over the previous year, and the net profit of the mother was 854.26 million yuan, an increase of 58.0% over the previous year.
Animal vaccine sector: The intensive layout has finally borne fruit. The vaccine business has achieved a breakthrough. After years of intensive operation, the company achieved a breakthrough in the veterinary vaccine sector in 2020, with operating income of 230 million yuan, an increase of 246% over the previous year, and net profit of 70 million yuan, an increase of 216% over the previous year, turning a loss into a profit.
The company has continuously stepped up its market development efforts. Driven by the overall marketing strategy of “Dajinhe, Dadongbao”, its products have been continuously recognized by the market, and it has successfully developed a number of major customers. The pork blue ear, pig rings, and mycoplasma swine vaccines are widely used by some large domestic breeding groups, and their market share is gradually increasing.
At the same time, the company continues to step up R&D and registration efforts, and has a rich reserve of new products, covering products related to major diseases such as foot and mouth disease, chronic diseases, and African swine fever. In the future, as new products continue to be launched, it is expected to support the continuous growth of the company's performance.
Chlortetracycline sector: After short-term pain, it is expected that there will be a steady rebound in '21, and China's “anti-resistance” policy was officially implemented in 2020. The regulatory policy and market system for chlortetracycline products have all changed a great deal. This change is largely based on the “anti-resistance” policy of the United States. The resistance restriction policy implemented by the US in 2017 once put pressure on the entire industry, but after a period of adaptation, the market gradually returned to normal. The total amount of tetracycline used in the US in 2019 was 4117 tons, an increase of 4% over the previous year, and an increase of 16% over 2017. Looking at the long term, the domestic chlortetracycline market is expected to show a trend similar to short-term shocks and long-term growth after the introduction of the US resistance restriction policy. As an industry leader, the company has responded positively to changes in the industry. With the increase and deepening of marketing efforts, the breeding line has begun to gradually recognize and use gold mycin products. After a certain period of run-in, the domestic sales market for chlortetracycline products is expected to resume growth.
Profit forecasting and investment advice
Affected by the African swine fever epidemic and the COVID-19 epidemic overseas, we lowered the company's 21/22 results.
We expect the company's net profit for 2021-2023 to be 252/335/403 million yuan (value before 21/22 was 375/457 million yuan), 115%/33%/20%, EPS was 0.40/0.53/0.63 yuan respectively, and the corresponding PE was 17/13/10 times respectively. We believe that demand in the chlortetracycline industry is rigid, the competitive pattern is good, and the company's leading position is stable and has pricing power. At the same time, the company actively developed the veterinary vaccine business and turned a loss into a profit in 2020, which is expected to become another driving force for the company's performance growth in the future.
Based on this, it was given 30 times PE in 21 years, with a target price of 12 yuan to maintain the “buy” rating.
Risk warning: risk of policy changes; risk of epidemic; risk of new product expansion falling short of expectations