More than 5% of R & D investment and continuous capacity expansion every year are two “sharp swords” to support Zhejiang Nhu Company Ltd(002001) further. However, the rise in the price of raw materials has brought great challenges to the development of Zhejiang Nhu Company Ltd(002001) .
How much imagination can chemical enterprises with a market value of 80 billion have?
Chongyang investment may be one of the most suitable institutions to answer this question. Since participating in the fixed increase of Zhejiang Nhu Company Ltd(002001) (002001. SZ) at the end of 2017, Chongyang investment has “lived” in Zhejiang Nhu Company Ltd(002001) . Its shareholding increased instead of decreasing. According to the third quarterly report of 2021, Chongyang strategic Huizhi, Chongyang strategic Qizhou and Chongyang group held a total of Zhejiang Nhu Company Ltd(002001) 2.71%, an increase of about 1 percentage point compared with the admission in 2017. During this period, the total market value of Zhejiang Nhu Company Ltd(002001) nearly doubled
Continuously advanced vitamin faucet
As the first enterprise to land on the SME board, Zhejiang Nhu Company Ltd(002001) has gradually grown from a local small manufacturer to an international vitamin leader. Its vitamin products include vitamin E, vitamin A, vitamin C, methionine, vitamin D3, biotin, coenzyme Q10, astaxanthin, etc., which are mainly used as feed additives and food additives. Among them, the share of vitamin E and vitamin A is the world’s leading.
While constantly improving the vitamin industry chain, Zhejiang Nhu Company Ltd(002001) also enters the flavor and fragrance industry through the intermediates of vitamin A and vitamin E production process linalool and citral. At present, its production capacity of linalool, citral and raspberry ketone is also in the forefront of the world.
Similar business extension is also carried out in the nutrition industry.
At the beginning of 2017, the trial production of Zhejiang Nhu Company Ltd(002001) methionine project was completed. At the end of the same year, Zhejiang Nhu Company Ltd(002001) completed a fixed increase of 4.9 billion yuan, and the Chongyang strategic investment cost about 600 million yuan. After deducting the issuance expenses, the fixed increase project is fully used for the investment of 250000 tons of methionine project.
Then, in 2019, Zhejiang Nhu Company Ltd(002001) phosgene qualification was approved; In 2020, Heilongjiang fermentation method project was put into operation and Zhejiang Nhu Company Ltd(002001) officially entered the corn fermentation industry chain.
The reason why Zhejiang Nhu Company Ltd(002001) continues to expand its category is related to the industry in which Zhejiang Nhu Company Ltd(002001) is located. In the fine chemical industry, the market scale of a single product is generally not very large. If an enterprise wants to be bigger and stronger, it must expand its business.
With the increase of categories, Zhejiang Nhu Company Ltd(002001) capacity construction is also continuing.
In the 2020 annual report, Zhejiang Nhu Company Ltd(002001) fixed assets increased by 78.44% over the beginning of the year, reaching 13.914 billion yuan, corresponding to a 78.3% decrease in construction in progress over the beginning of the year. This transformation from construction in progress to fixed assets will continue. According to the third quarterly report of 2021, Zhejiang Nhu Company Ltd(002001) although the fixed assets have not changed much, the construction in progress has increased by more than 90% compared with the beginning of the year.
With sufficient production capacity, Zhejiang Nhu Company Ltd(002001) ‘s performance and market value have also increased. Its market value has increased from 16.7 billion yuan at the beginning of 2010 to more than 80 billion yuan at present. The operating revenue also increased from 3.4 billion yuan in 2010 to 10.3 billion yuan in 2020. During the period, the net profit attributable to the parent company increased by more than three times
The performance fluctuates greatly affected by the cycle
However, behind the growth is instability.
Like all cyclical industries, Zhejiang Nhu Company Ltd(002001) cannot avoid the impact of cycles. As it takes time for new products to contribute to the performance, and their vitamin revenue accounts for more than 60% all year round, the performance fluctuates significantly.
As shown in the above figure, the performance of Zhejiang Nhu Company Ltd(002001) from 2012 to 2015 remained sluggish, which was mainly due to the global economic downturn, the sluggish demand of the breeding industry and the non competition of some vitamin varieties, resulting in the poor prosperity of the vitamin industry. From 2016 to 2018, when China’s environmental protection was strengthened and the supply of giants such as DSM and BASF was blocked, the price of vitamins increased. At the same time, the successful promotion of Zhejiang Nhu Company Ltd(002001) methionine phase I project made its performance grow rapidly.
In recent years, with the increase in the proportion of flavors and fragrances, the expansion of API and new materials business, the performance of Zhejiang Nhu Company Ltd(002001) has been better than before 2015 when the aquaculture industry declined.
This is more obvious in the gross profit margin.
Although the income of nutriment and flavour and fragrance business declined in 2019, the gross profit margin of flavor and fragrance business increased steadily as the gross profit margin declined. Therefore, the overall gross profit margin of Zhejiang Nhu Company Ltd(002001) has remained steady in recent years, and the return on net assets has been more than 10% for five consecutive years
the expansion of new categories has attracted attention, and the rise in the price of raw materials has brought challenges
The past is so, what about the future?
This should be seen from the capacity and product planning of Zhejiang Nhu Company Ltd(002001) . In the survey last November, Zhejiang Nhu Company Ltd(002001) introduced the production capacity progress of each sector.
In the nutrition sector, its methionine project has a production capacity of 150000 tons, which is normally produced and sold. Due to the impact of the epidemic, the construction progress of 150000 tons of production units under construction is delayed until 2023. Taurine project has been applied for construction, and vitamin B6 project is in the process of commissioning. Phase I of the biological fermentation project has been put into operation, and the infrastructure has been established and improved, laying the foundation for phase II vitamin B and other products.
The fragrance and flavor sector has been basically completed. The further land expropriation construction will further enrich the product category and make series products. The menthol project is under construction.
In the new material sector, PPS phase III is under expansion and will continue to expand new varieties
Among all the new products, adiponitrile is undoubtedly the most dazzling one.
Adiponitrile is mainly used to produce nylon 66 The research report shows that more than 90% of adiponitrile in the world is used for the production of nylon 66 salt every year. How important is nylon 66? According to the research data of Sairui, the global nylon market is dominated by nylon 6 and nylon 66, accounting for about 86% in total. Nylon 66 has higher toughness, melting point and lower water absorption than nylon 6, so it is mainly used in high-end industrial fields, such as automobile, electronics, aviation and so on.
However, China relies heavily on imports of adiponitrile, and foreign oligarchs supply adiponitrile on a rationing basis. Therefore, the development of nylon 66 in China is slow, and the consumption accounts for only about 20%. Obviously, adiponitrile has better domestic substitution space.
Relying on the R & D investment accounting for more than 5% of revenue for many consecutive years, Zhejiang Nhu Company Ltd(002001) independently developed the adiponitrile synthesis technology, which is progressing smoothly in the pilot stage.
In addition, Zhejiang Nhu Company Ltd(002001) continues to extend downstream with the help of the original product isopentenol of the large chemical platform, and lays out the industrial chain of “isopentenol caronic anhydride azabicyclic acid”. Caron anhydride is the key intermediate of Pfizer covid-19 oral small molecule drugs. The multi-step reaction of Caron anhydride produces azabicycles, which can be used to produce Pfizer covid-19 oral small molecule drugs.
It is worth mentioning that there is more than Zhejiang Nhu Company Ltd(002001) one company with adiponitrile in China. On January 4, China National Chemical Engineering Co.Ltd(601117) said on the interactive platform that the overall cumulative completion progress of Tianchen Qixiang adiponitrile project has reached more than 97%. Huafon Chemical Co.Ltd(002064) , Shenma Industry Co.Ltd(600810) and other companies also have adiponitrile capacity under construction.
For Zhejiang Nhu Company Ltd(002001) , category expansion has proved to alleviate the impact of cycle on performance, and the proportion of R & D investment of more than 5% for many consecutive years is an important support for new category expansion. With the increase of categories, capacity expansion should continue, and the low debt ratio provides financing space for capacity expansion (from 2009 to 2020, Zhejiang Nhu Company Ltd(002001) only the debt ratio exceeded 40% in 2019 and 30% in recent two years).
This may be one of the reasons why Chongyang investment sticks to Zhejiang Nhu Company Ltd(002001) .
However, there are still many challenges ahead of Zhejiang Nhu Company Ltd(002001) .
In addition to competition in the same industry, the price fluctuation of raw materials is also one of them. It is understood that the main raw materials used by Zhejiang Nhu Company Ltd(002001) are corn and basic chemical raw materials. At present, the overall price of corn is still high, and the bulk commodities represented by crude oil are also generally stronger.
How to resolve the rising pressure of raw materials is a new problem in front of Zhejiang Nhu Company Ltd(002001) .
