An overview of events. The company released the third-quarter report of 2022 on October 25, with revenue of 671 million yuan in the first three quarters of 2022,-10.0% year-on-year; net profit of 26 million yuan,-78.0%; and deduction of non-return net profit of 18 million yuan,-83.5% of the same period last year. Among them, Q3 realized revenue of 274 million yuan, year-on-year + 30.6%, month-on-month + 30.5%; realized net profit of 20 million yuan, + 8.1%, + 280.0%; and deducted non-return net profit of 17 million yuan, + 3.4% year-on-year, and + 6.3%.
Both supply and demand have improved, and profitability has been gradually repaired. 2022Q3's overall gross profit margin is 22.26%, year-on-year-3.6PCT, month-on-month + 4.1PCT; net profit rate 7.25%, year-on-year-1.5PCT, month-on-month + 4.9PCT. The gradual recovery of the company's profitability is mainly due to the improvement of both supply and demand. On the supply side, the price of APIs returned to a reasonable range. In September 2022, the VPi index fell 12.5% year on year, changing the trend of rising prices in the peak consumption season of "gold, silver and silver" in previous years. On the demand side, as pig prices have continued to rise since July, efficient farming enterprises have turned losses into profits, and the demand for veterinary drugs has gradually shifted from low price priority to focusing on product quality and efficacy. The company as a high-quality veterinary drug enterprise, the main recovery of production and sales is more obvious, among which, the monthly sales income of Tywann preparation is growing rapidly, gradually returning to the normal trend, or will usher in a new round of rebound in demand for downstream farming.
With the gradual release of new production capacity, the improvement of economies of scale is expected to control cost-reduction costs. As of 2022Q3, the company's newly built capacity has not yet been fully put into production, and a large number of new capacity leads to higher depreciation and amortization expenses for fixed assets. With the powder / premix production line expansion project (annual design capacity of 2100 tons) and other smooth production, the annual output of 1000 tons of tylosin project put into commissioning, the company's production capacity continues to expand. Superimposed upstream API enterprise competition intensifies, the formation of the company's economies of scale is expected to depress the API procurement price. In the future, with the improvement of sales volume and capacity utilization, the expenses will be diluted gradually.
Pay attention to R & D and innovation and deepen the cooperation of major customers. The company's newly developed fourth-generation animal-specific antibacterial drug Tediloxin injection was put on the market in the first half of this year, and the market acceptance exceeded expectations. At the same time, the company continued to optimize the fermentation process of Tywanin, and the fermentation potency and batch average yield increased by 4.5% and 6.7% respectively compared with 2021, helping the company to further improve its profitability. The company relies on the original "steady blue increase immunity" program (treatment of soojing + health exemption + green benefit state) to continuously increase cooperation with the group factory customers, a number of pig breeding head enterprises have carried out product evaluation, and some of them have been included in the bidding procurement catalogue. the market responsiveness is high, and the permeability increases steadily.
Investment suggestion: the company is expected to achieve net profit of 0.67,2.36 and 323 million yuan respectively from 2022 to 2024, corresponding to EPS of 0.41,1.42,1.94 yuan respectively. Considering that the company is the leader of domestic veterinary medicine, the industrial layout is accelerated upward, the profit space is expected to be fully opened, and the "recommended" rating is maintained.
Risk tips: rising prices of APIs, lower-than-expected production capacity, and sudden outbreak of major animal diseases.