Event: the company released its 2019 annual report, with annual revenue of 1.258 billion yuan (year-on-year-11.12%) and net profit of 44 million yuan (year-on-year + 100.88%).
VB3, VB5 price increases, the company's gross profit margin increased, performance growth: the company's 2019 performance growth is mainly due to the increase in the prices of some vitamin products and the increase in the output of Jiangxi brothers and the decrease in unit manufacturing costs. Affected by African classical swine fever and its subsidiary Jiangsu Brothers Vitamin Co., Ltd. stopped production for a long time, the company's sales of pharmaceutical and chemical products in 2019 were 65000 tons, down 6.92% from the same period last year. In 2019, the company's gross profit margin was 29.32%, an increase of 6.08 pct over the same period last year, of which the gross profit margin of vitamin products was 37.57%, an increase of 7.43 pct.
According to Boya and News, in 2019, the average prices of vitamin K3, B1, B3 and B5 changed year-on-year by-1.3%,-45.1%, 22.9% and 102.3%, respectively. Jiangxi brothers mainly engaged in VB3, VB5,2019 annual net profit of 101 million yuan, a significant increase, to make up for previous years' losses. At the end of 2019, the company was under construction of 829 million yuan, an increase of 71.2% over the beginning of the year, mainly due to the construction of raw material medicine and hydroquinone projects of Jiangxi Brothers Company.
Jiangsu Brothers, an important subsidiary, resumed production, vitamin prices bottomed out and rebounded, and the company's performance is expected to usher in an inflection point:
Starting from 2020, the vitamin market picked up and prices bottomed out and rebounded sharply. According to Boya and News, at the end of the first quarter of 2020, the prices of vitamin K3, B1 and B3 increased by 59.5%, 90.5% and 22.5% respectively compared with the same period at the beginning of the year.
Jiangsu brothers stopped production of vitamins in April 2019 and received approval to resume production in March 2020, with an annual output of 3200 tons of vitamin B1 and 1000 tons of β-aminopropionic acid. VB1 is the company's main source of profit. The net profit is-22.4 million yuan due to the suspension of production in 2019, and the superimposed price increase in 2020 is expected to form a net profit of about 100 million yuan. According to the announcement, in January 2020, 100% equity of CISA was acquired by brother South Africa of foreign wholly-owned grandson company. The market share of chrome tanning agent will be further increased, while ensuring a stable and low-cost supply of raw material sodium dichromate. CISA is expected to increase its net profit by about 90 million yuan.
The new project with intensive layout of Jiangxi base is expected to become a new profit growth point: according to the announcement, the construction project of hydroquinone and its derivatives, iodine contrast agent and its intermediates built by Jiangxi brothers will start trial production at the end of 2019 and is expected to reach the scheduled state of use by the end of June 2020. Jiangxi base is the focus of the company's capital expenditure in the past two years. The company announced that it plans to raise 290 million yuan to build a new project with an annual output of 13000 tons of vitamin B3 and 3000 tons of spices and intermediates. At the same time, the company plans to raise 1.2 billion yuan in a non-public offering, of which 890 million is used for the annual production of 30000 tons of natural spices construction projects, committed to building a complete turpentine industry chain.
Investment suggestion: the company's net profit from 2020 to 2022 is expected to be 250 million yuan, 330 million yuan and 400 million yuan respectively, corresponding to 21 times, 16 times and 14 times of PE, with a target price of 6.9 yuan.
Risk tips: project construction is not as expected, product prices fluctuate, capacity start-up is limited, and so on.