Description of the event
The company reported for the first quarter of 2024 that it achieved revenue of 1.21 billion yuan (-12.3% YoY); realized net profit of 130 million yuan (YoY -47.4%, -8.1% YoY); and realized net profit of 120 million yuan (-38.6% YoY, -4.1% YoY).
Incident comments
Sweeteners have bottomed out, and export demand has grown rapidly. In the sweetener sector, the average prices of 2024Q1 sucralose, acesulfame, methylmaltol, and ethyl maltol were 12.5, 3.8, 6.0, and 57,000 yuan/ton, respectively, with year-on-year changes of -44.4%, -36.7%, -38.5%, and -19.9%, and -7.2%, -4.0%, -2.6%, and -3.1% month-on-month. Benefiting from global sugar reduction trends, export demand for sweeteners grew rapidly. The 2024Q1 industry exported 4651 and 4,864 tons of sucralose and acesulfame respectively, up 31.5% and 40.9%, respectively. In the basic chemicals sector, the average market prices for 2024Q1 melamine, sulfuric acid (98%), hydrogen peroxide, formaldehyde and liquid ammonia were 6724, 198, 759, 1160, 2,852 yuan/ton, -4.5%, -24.2%, and -0.3%. Looking at 2024Q1, the company achieved a gross sales margin of 21.1% (YoY -6.2pct, -1.3pct month-on-month); achieved a net sales margin of 10.6% (-7.1pct YoY, -0.9pct month-on-month).
In April, the price of malt powder increased, and sucralose bottomed out at an accelerated pace. According to Baichuan Yingfu, the average market price of methyl maltol increased from 60,000 yuan/ton to 90,000 yuan/ton on April 16, 2024; the price of ethyl maltol increased from 57,000 yuan/ton to 70,000 yuan/ton on April 11, 2024, and increased to 75,000 yuan/ton on April 16. The price of malt powder has begun to reverse. Baichuan Yingfu shows that Jinhe Industrial's production capacity is 9,000 tons, which is expected to fully benefit. The price of sucralose continued to bottom out in April. The latest price on April 29 was 110,000 yuan/ton, which continued to drop 15,000 yuan/ton from the beginning of April. According to Baichuan Yingfu data, CR3 in the sucralose, acesulfame, and maltol industries were 80.2%, 95.5%, and 76.6% respectively, and the industry pattern is relatively good. The company is a leader in sucralose, continuously reducing costs and increasing efficiency. It is expected that sucralose will accelerate to an inflection point in the industry.
Dingyuan Phase II is advancing at an accelerated pace, laying out reserves for new growing varieties. In 2023, the company completed the construction of the main projects of the “Dingyuan Phase II Project”, including major projects with an annual output of 600,000 tons of sulfuric acid, 60,000 tons of ionic membrane caustic soda, 60,000 tons of ionic membrane potassium and 150,000 tons of hydrogen peroxide. It is expected to reach trial production conditions one after another in April 2024.
At the same time, the subsidiary completed process verification of food additives, flavors and fragrance products and administrative approval procedures for project construction, and completed the construction of major engineering entities. It is expected to reach trial production conditions in May 2024. The company continued to improve sweetener application technology and solutions, completed the application process for D-allodonose-3-episomerase, and was successfully approved as a new enzyme preparation for the food industry on February 29, 2024. Relying on a synthetic biology pilot line based on an allodonose device, the company has carried out research work on the raw use of non-food bio-based materials, production of prebiotics, dietary fiber, other starch sugars (alcohol), some functional nutritional health products, and functional daily chemical fragrance products.
The company's main products are currently at the bottom of the cycle, and the upward flexibility is huge. Dingyuan Phase II and the new product layout have brought growth. The 24-26 results are expected to be $8.7, 11.3, and 1.29 billion, maintaining the “buy” rating.
Risk warning
1. Environmental management risks;
2. The risk that project construction falls short of expectations.