Cofco Biotechnology Co.Ltd(000930) (000930)
The company is the leader of corn deep processing in China
The company is subordinate to COFCO group. It is the only enterprise in China whose business covers three fields: biomass energy, biomass materials, food raw materials and ingredients. It is also one of the largest and technologically leading corn deep-processing enterprises in China. At present, the company’s main business is the production and sales of fuel ethanol, edible alcohol, starch, starch sugar, citric acid, monosodium glutamate, polylactic acid, modified starch and by-products. From the perspective of revenue composition, from 2019 to 2020, the company’s revenue from fuel ethanol and starch accounted for about 45% / 20% respectively, which is the main revenue source of the company; From the perspective of gross profit composition, the company’s gross profit of fuel ethanol and starch accounts for about 55% / 20% respectively, which is the main profit source of the company.
The fuel ethanol industry has a broad space, the short-term pressure does not change, and the medium and long-term trend is good
After years of development, China has become the third largest producer of fuel ethanol in the world, but its output accounts for only about 3%, which is far behind the United States and Brazil. We believe that in the short term, in 2020, under the influence of covid-19 pneumonia and the contraction of China’s gasoline consumption, the demand for fuel ethanol will shrink. However, in the medium and long term, China’s fuel ethanol has broad prospects for development. The annual consumption of gasoline in China is about 130 million tons. According to the specific requirements for the comprehensive promotion of fuel ethanol in 2020 put forward in the implementation plan on expanding the production of biofuel ethanol and promoting the use of vehicle ethanol gasoline, calculated according to the addition of 10%, the demand for fuel ethanol in China is expected to reach 13 million tons, while the current output of fuel ethanol in China is only about 3 million tons, There is a large gap between production and demand, and there is broad room for growth in the future.
M & A opens up market space and the prospect of degradable materials is promising
In 2018, the company acquired 100% equity of biochemical energy, 100% equity of Biochemistry and 100% equity of Huali investment from biochemical investment by issuing shares. Cofco Biotechnology Co.Ltd(000930) deep processing capacity will be greatly increased, including fuel ethanol capacity of 1.35 million tons (including 750000 tons of original energy + 600000 tons of biochemical energy); starch capacity of 1.65 million tons; starch sugar capacity of 900000 tons; and feed raw material capacity of 2 million tons. This acquisition has greatly increased the company’s deep processing capacity and further consolidated the company’s leading position in the industry.
In addition, the company has been deeply engaged in the field of biodegradable materials for more than 15 years, It also invested in the construction of a 30000 T / a lactide (intermediate for PLA production) production line in Yushu City, Jilin Province. The company not only needs to open up the whole industrial chain production process from renewable plant resources such as corn to biodegradable materials (PLA and PHA), but also needs to produce high-end and high value-added downstream products, including modified special materials such as PLA / PHA blend fibers, which will be Cofco Biotechnology Co.Ltd(000930) The main high-end products in the future. We believe that degradable materials are the future development direction and are strongly supported by national policies. At present, The company has broken through the main technical bottleneck of industrial production of lactide (an intermediate for the synthesis of degradable biomaterial polylactic acid (PLA). Lactide and PLA are high value-added products downstream of starch. After they are officially put into operation, they will further enhance the overall competitiveness and profitability of Cofco Biotechnology Co.Ltd(000930) .
Investment advice
We expect that from 2021 to 2023, the company’s operating revenue will be 25209 / 28506 / 31905 million yuan respectively, the net profit attributable to the parent company will be 1095 / 1473 / 1782 million yuan respectively, the corresponding EPS will be 0.59/0.79/0.95 yuan respectively, and the closing price on November 23, 2021 will be 11.59 yuan, and the corresponding PE will be 20 / 15 / 12x respectively. Considering the large development space of degradable materials, after lactide and PLA are officially put into operation, the overall competitiveness and profitability of the company will be greatly improved. It will be covered for the first time and given a “buy” rating.
Risk statement
Covid-19 pneumonia epidemic risk, oil price fluctuation risk and excessive increase of corn price.
