The General Office of the Beijing Municipal People's Government issued the “Beijing Action Plan to Accelerate Collaborative Innovation in Medicine and Health” to accelerate the output of major achievements in the field of life sciences. Deploying “nuclear explosion point” projects in cutting-edge technology fields such as cell-gene therapy, brain-computer interface, and synthetic biology, has spawned disruptive and leading scientific discoveries and technological breakthroughs.

Amino acids replace soybean meal to help food security, and synthetic biology helps the industry reduce costs and expand categories.

According to the Huatai Securities Research Report, amino acids are the basic materials for building proteins, and global demand will exceed 10 million tons in 2023.

Looking at the medium to long term:

① In the context of food security, the demand for amino acids to replace soybean meal is expected to continue to grow;

② Synthetic biotechnology helps reduce the cost and expand demand for small varieties of amino acids;

③ In the future, the promotion of genetically modified corn may help reduce the cost of amino acids and promote the cost-effective replacement of amino acids for soybean meal.

In the short to medium term:

① Optimize the competitive pattern of large varieties such as Lai, Su, and Methionine to support the profit center of products;

② As stocks continue to be eliminated in the downstream farming sector, pig prices are expected to rebound in the future to drive storage recovery and help amino acid demand;

③ The current low level of soybean prices or inhibits planting profits, compounded by disturbances such as weather factors. Future soybean meal prices are expected to rise, helping to raise amino acid prices;

④ Ley/threonine accounts for a high share of exports, and overseas demand is also supported.

According to Huatai Securities, biological fermentation is the main production process for amino acids. Currently, the amino acid sector may be one of the first sectors to achieve performance in synthetic biology. It is optimistic that progress in synthetic biotechnology will drive the development and valuation reshaping of the amino acid industry.

Due to high production barriers, the application and promotion of small varieties of amino acids such as vale/color/isolite/phenylalanine is mainly constrained by cost and price. Due to the long-term growth potential to replace soybean meal demand, industry companies have scrambled in recent years. In the future, relying on synthetic biotechnology, it is expected that the cost and price will continue to decline. Demand for small amino acids is expected to continue to expand, and the long-term growth potential is remarkable. At the same time, in the future, as demand for small-variety amino acids continues to grow, and the synthetic biotechnology strength of corresponding enterprises is verified, it may help increase the valuation of the industry and enterprises.

Amino acid-related companies:

Fufeng Group (00546): An international bio-fermented products company, mainly dedicated to the R&D, production and operation of various amino acids, derivatives, and biocolates. It is a world-famous producer of monosodium glutamate, xanthan gum, and amino acids. Fufeng Group recently announced its 2023 annual results, with revenue of about 28 billion yuan (RMB), up 1.9% year on year; profit attributable to shareholders was about 3.1 billion yuan, a decrease of 18.6% year on year; profit per share was 124.02 points. The company is conducting feasibility studies in the US and Eastern Europe with the aim of establishing two major production bases (production of threonine and lysine) to improve production efficiency by purchasing local raw materials and selling them locally. At the same time, the company successfully established three regional marketing centers in Vietnam, the US and the Netherlands to better serve overseas customers.