The company is the leader of domestic veterinary drug preparation. Huisheng Biology is mainly engaged in animal pharmaceuticals, and its products mainly include chemical preparations, raw materials, traditional Chinese medicine preparations and feed additives, of which nearly 85% of the company's income comes from animal chemical preparations. Since its establishment, the company has steadily expanded its production capacity and built a solid R & D system. By the end of 2021, the annual production capacity of Tywanin has reached 240t, and the annual output of solid and liquid veterinary APIs and preparations has reached 8736 tons and 1.08 million liters respectively. The company's products have achieved full coverage of mainstream veterinary drugs, and have occupied a leading position in the field of domestic veterinary chemical preparations, and their market share ranks among the top 10 in the industry all the year round.
Pig prices are good to drive the animal protection industry upward, and the policy is expected to accelerate the transformation and upgrading of veterinary drug enterprises. As for the cycle, we believe that the first quarter of 2022 is the weakest time for pig prices in the next three years. At present, pig prices have risen by more than 22 yuan / kg, the industry is booming, and the operation of the animal protection industry is expected to improve under the drive of pig prices. For the industry itself, in the short and medium term, the deadline for the new version of GMP has arrived, the backward production capacity of veterinary drugs has been obviously cleared in the short term, and the demand of the breeding side brought about by the superimposed feed end ban has been upgraded. The head veterinary drug enterprises with obvious advantages in research and development and products are expected to fully benefit and seize more shares. For a long time, the large-scale process of the aquaculture industry is accelerating, the head veterinary drug enterprises are expected to rely on their advantages in research and development, products and channels to better meet the needs of large-scale breeding enterprises, and the market share is expected to be further concentrated to the head.
The upstream raw material production capacity has been put into operation steadily, and the company's operating volume may rise in the second quarter. In the short term, domestic veterinary API prices have fallen back to the normal range in 2022Q1, the company's veterinary chemical preparation cost end pressure is basically lifted, while the revenue end or with downstream breeding profit repair and pick up, the company's volume profit performance is expected to usher in a bottom pick-up in 2022Q2. In the medium term, the company will increase its API production capacity upstream, and in the future, the annual production capacity of tylosin and tylosin will reach 2000 tons and 840t respectively, relying on the advantages of tylosin-related products and group customer direct marketing channels, it is expected that the performance after the new production capacity is put into production will release a high degree of certainty, which may effectively enhance the cost and quality advantages of the company's veterinary drug preparation products in the future, and promote its continuous expansion. In the long run, the proportion of direct sales of the company has exceeded 60%, and it is expected to fully benefit from the growth dividend brought by the scale process of the aquaculture chain in the future.
Profit forecast and valuation: as a high-quality veterinary drug service provider for large-scale farming enterprises, the company's performance and valuation reached the bottom in the first quarter, and the margin of safety is enough. the next uptrend in pig prices is expected to lead to a continuous pick-up in the company's revenue. superimposed on the steady release of the company's raw materials and drugs in the future, we are optimistic about the company's performance growth elasticity. It is estimated that the company's homing net profit from 2022 to 2024 will be 0.9max 170.320 million yuan (- 33.5% Universe 91.8% Universe 88.7%), and the EPS will be 0.53 won 1.02pm 1.92 respectively. Through multi-angle valuation, the company is expected to have a reasonable valuation of 26.9-29.2 yuan, with a premium of 25% Murray 35% over the current share price. It will be covered for the first time and given a buy rating.
Risk hints: the risk of another sharp rise in API prices; the risk of a significant decline in sales of swine veterinary drug products caused by African classical swine fever; and the risk that the scale of downstream farming is not as expected.