Performance grew at a high year-on-year rate, and the volume and price of vitamins and methionine rose sharply. The 2024H2 boom is expected to continue to release the 2024 mid-year report, achieving revenue of 9.845 billion yuan, +32.7% year over year; net profit to mother of 2.204 billion yuan, +48.6% year over year; deducting non-net profit of 2.157 billion yuan, or +56.9% year over year. Among them, Q2 achieved revenue of 5.346 billion yuan, +40.5% year over month, +18.8% month on month; net profit to mother of 1.335 billion yuan, +53.5% year on month; deducted non-net profit of 1.3 billion yuan, +64.8% year on year and +51.6% month on month. The performance was close to the previously forecast limit, mainly benefiting from the sharp rise in the volume and price of nutritional products and cost reduction and efficiency. We maintain our profit forecast. We expect the company's net profit to be 4.421, 5.266, and 6.084 billion yuan for 2024-2026, corresponding EPS of 1.43, 1.70, and 1.97 yuan/share, and the current stock price corresponding to PE is 13.5, 11.3, and 9.8 times. We are optimistic that the company will adhere to the main channels of “chemical +” and “bio+” strategies, adhere to innovation drive, advance project construction in an orderly manner, and maintain a “buy” rating.
Vitamin prices have risen, methionine's profitability is strong, and the scale continues to expand. Looking at the PA66 segment of the new materials layout, 2024H1 nutrition products, flavors and fragrances revenue was 6.68, 1.92 billion yuan, +38.30%, +17.94%; gross profit margin was 35.86% and 49.69%, +6.98 pcts and -1.79 pcts year over year; in addition, revenue from new materials was 0.72 billion yuan, +24.89% year over year. According to subsidiary companies, 2024H1 Shandong Xinhecheng's amino acid revenue was 3.21 billion yuan, net profit was 1.18 billion yuan, and the net interest rate was as high as 36.8%, up to +11.1pcts. With the 0.18 million ton liquid methionine (planned to be completed by the end of 2024) and the Shandong Xinhecheng amino acid methionine integrated improvement project (increase of 0.07 million tons), the company's annual methionine production capacity will reach 0.55 million tons in the future. The advantages are expected to further improve profitability. According to Wind and Boya Hexun data, supply disturbances have driven vitamin prices to the bottom up since 2024. BASF announced force majeure such as VA and VE on August 7, and is expected to restart in January 2025. Previously, on February 15, 2024, DSM announced plans to divest the animal nutrition and health business by 2025. The average market prices for VA (0.5 millionIU/g) in Q3 (as of August 23), VE (50%), and VD3 (0.5 millionIU/g), respectively 147.2, 113.9, 201.3 yuan/kg, +70%, +62%, and +235% compared to Q2, respectively. The 2024H2 vitamin boom is expected to continue. In the new materials sector, the company announced that it will invest about 10 billion yuan to build a new nylon material project using butadiene and the like as raw materials, including the first phase of 0.1 million tons/year of adiponitrile-hexanediamine, phase II, 0.4 million tons/year of adiponitrile-hexanediamine, and the construction of 0.4 million tons/year nylon 66 on the downstream material side.
Risk warning: Competition in the vitamin and methionine industry has intensified, project commissioning falls short of expectations, exchange rate fluctuations, etc.
