Incident Overview
The company announced the 2024 employee shareholding plan (draft). The total number of people participating in the employee shareholding plan did not exceed 245, including 9 directors (excluding independent directors), supervisors, and senior management. The total share of the plan did not exceed 250 million shares when the employee's shareholding plan was established. Using “shares” as the subscription unit, the subscription price for each share was RMB 1.00, and the maximum amount of capital raised was RMB 250 million.
Analytical judgment:
The employee stock ownership plan has been launched for 4 consecutive years, demonstrating the company's cohesion & development confidence in 2021-2024. According to the employee stock ownership plan (draft), the purpose of this employee stock ownership plan is based on the one hand confidence in the company's future development, and on the other hand, to establish and improve the benefit-sharing mechanism for employees and shareholders, improve the level of corporate governance, enhance the cohesion and competitiveness of employees, and promote the long-term, sustainable and healthy development of the company. The total capital limit for this employee stock ownership plan does not exceed 250 million yuan. We believe that the company has launched an employee stock ownership plan for 4 consecutive years, which shows the company's strong cohesion, and that the number of directors and senior supervisors participating in this employee stock ownership plan is 9. The maximum subscription share limit is 48 million shares, accounting for 19.20%. We believe this also shows confidence in the company's future development.
The improvement in the supply and demand pattern of the main product is expected to benefit from the release of new production capacity. Judging from the company's main product, feed amino acids, the prices of lysine, threonine, and tryptophan were all lower and then higher in 2023. In the first half of 2023, on the one hand, exports declined. On the other hand, domestic pig prices continued to be sluggish, and downstream farming suffered deep losses. The domestic market showed a pattern where supply exceeded demand, and feed amino acids operated weakly. Entering the second quarter of 2023, the operating rate of enterprises declined, supply was tightened, manufacturers raised prices, and the profitability of the industry improved. In the second half of 2023, with the tightening of supply due to inventory consumption and falling operating rates, the supply and demand pattern improved significantly. Prices of lysine, threonine, and tryptophan all showed an upward trend. 2023Q4. According to Boya Hexun data, the prices of lysine (domestic, 98.5%) /threonine (domestic, 99%) /tryptophan (domestic, 99%) were 10399.19/12204.03/73818.55 yuan/ton, respectively, up 5.13%/7.25%/7.28% year on month, up 9.90%/ 27.01%/12.89%. As of January 17, 2024, the price of lysine/threonine/tryptophan was 9300/10,700/76,500 yuan/ton respectively, which is lower than the price of 2023Q4, but there is still a significant year-on-year increase. In terms of project construction, according to the company's 2023 semi-annual report, the Tongliao threonine project completed equipment commissioning and was tested using water instead of water as planned in July. We believe that with the long-term improvement of the feed amino acid industry pattern, the company will benefit from the release of production capacity, and the profit center is expected to move upward.
Investment advice
In the first half of 2023, the company's revenue and net profit to mother declined year-on-year due to price adjustments for the main product. In the second half of 2023, with the gradual digestion of product inventories, feed amino acid products ushered in an improved pattern, and product prices gradually increased. Although prices have decreased compared to 2023Q4 up to now in 2024, there was still a significant year-on-year increase. Furthermore, while prices of leading products such as lysine, threonine, and monosodium glutamate were being adjusted, star products such as xanthan gum and pharmaceutical amino acids continued to gain strength, ensuring a relatively stable income. Based on this, we kept the company's 23-25 operating revenue of 280.12/310.54/34.857 billion yuan unchanged, kept the company's net profit of 30.22/36.53/4.383 billion yuan unchanged, kept the company's 23-25 EPS1.03/1.24/1.49 unchanged, and the stock price of 10.06 yuan/share on January 17, 2024 corresponds to 10/8/7X for 23/24/25 PE, respectively, maintaining a “buy” rating.
Risk warning
Product price fluctuations, product sales falling short of expectations, policy disturbances, uncertainty about the implementation of employee stock ownership plans