\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 873 Meihua Holdings Group Co.Ltd(600873) )
Event overview
The operating income of the parent company in the first quarter was RMB 18.371 billion, a year-on-year increase of 2.62% over the same period last year, with a net profit of RMB 18.32 billion.
Analysis and judgment:
The revenue promoted the improvement of profitability, and the net profit attributable to the parent company in Q1 increased by more than 180%. During the reporting period, the company achieved an operating revenue of 6.712 billion yuan, a year-on-year increase of 26.45%. Specifically: according to the operating data, during the reporting period, the company’s fresh flavor agent achieved an operating revenue of 2.233 billion yuan, a year-on-year increase of 20.04%; The operating income of feed amino acids was 2.709 billion yuan, up 40.70% year-on-year; The operating income of pharmaceutical amino acids was 121 million yuan, a year-on-year decrease of 7.52%; The operating revenue of large raw materials and by-products was 1.083 billion yuan, an increase of 2.517 billion yuan year-on-year; Other (xanthan gum, trehalose, etc.) achieved an operating revenue of 566 million yuan, up 7.49% year-on-year. The reason why the company’s operating revenue increased by more than 25% year-on-year is that: (1) during the reporting period, the operating revenue of animal nutritional amino acid products increased by 35.65% compared with the same period of the previous year. The increase is due to the release of 300000 tons of lysine capacity of Jilin Meihua, the subsidiary of the company, the simultaneous increase of lysine volume and price, and the rise of the price of threonine and other feed products; (2) During the reporting period, the operating revenue of food taste trait optimization products increased by 22.39% over the same period of last year, mainly due to the rise in the prices of products such as monosodium glutamate, food grade xanthan gum and flavored disodium nucleotide. During the reporting period, the net profit attributable to the parent company increased by 183.71% over the same period of the previous year, mainly due to the growth of the company’s main business income and the improvement of the company’s profitability. The gross profit margin increased from 16.47% last year to 26.24%. During the reporting period, the increase of the company’s gross profit by 101.47% brought about the growth of the company’s net profit.
Alternative of corn soybean meal reduction & high price and good demand for feed amino acids. On March 15, 2021, the animal husbandry and Veterinary Bureau of the Ministry of agriculture and rural areas issued a notice on promoting the reduction and substitution of corn soybean meal, focusing on the work plan for the reduction and substitution of corn soybean meal in feed. The plan focuses on promoting the reduction and replacement of corn soybean meal in feed with grains and miscellaneous meal. The reduction of soybean meal in feed will increase the amount of miscellaneous meal. After protein reduction, there is an amino acid gap in feed raw materials. In order to ensure the overall amino acid balance in feed and improve feeding efficiency, the addition of feed amino acids needs to be increased accordingly. The soybean meal reduction plan increases the demand for feed amino acids. Since 2022, affected by the reduction of production in the country of origin & Sino US trade friction, the price of soybean meal has been high, further promoting the growth of feed amino acid demand. In 2022q1, the company realized an operating revenue of 2.709 billion yuan of feed amino acids, a year-on-year increase of more than 40%. As a leading enterprise of amino acids, the company’s demand for feed amino acids is improving, which is expected to further increase profits.
Release of production capacity & rising prices, optimization of food taste traits, steady improvement of products. In the first quarter of 2022, the price of monosodium glutamate in China rose against the trend. According to Zhuo Chuang information, the average transaction price of 40 mesh large package monosodium glutamate in the first quarter was 9325.4 yuan / ton, up 7.9% year-on-year and 27.8% compared with the first quarter of 2020. In terms of xanthan gum price, Zhuo Chuang information data showed that as of April 25, the mainstream transaction price of 80 items of Chinese food grade xanthan gum was 3 China Merchants Bank Co.Ltd(600036) 500 yuan / ton, up 62.9% year-on-year and stable month on month. In the first quarter, the prices of monosodium glutamate, xanthan gum and other products rose, driving the company’s food taste character optimization product revenue to increase by 22.39% year-on-year. At this stage, the production capacity of upstream xanthan gum production enterprises has not been fully released, the supply has decreased, and the balance inventory of the industry is slightly low. In the first quarter, the export volume of xanthan gum has increased significantly, the supply and demand is in tight balance & the raw material price is running at a high level. We expect the xanthan gum industry as a whole to continue to operate at a high level, and the company’s xanthan gum products will benefit. In terms of monosodium glutamate, the costs of monosodium glutamate in the first quarter were at an all-time high, and the purchase prices of corn, soda ash and power coal were higher than those in the same period in history. The upstream promoted the rise of monosodium glutamate prices. However, the epidemic situation was severe, transportation restrictions were strict, and the catering industry was greatly impacted. Superimposed on the regular demand off-season, we expect the consumption of monosodium glutamate in the second quarter to decline to a certain extent. On the whole, we believe that the company’s food taste character optimization product revenue will be stable and good.
Investment advice
Pig production capacity remains high & under the background of feed substitution resistance policy, the demand for amino acids is strong, and with the gradual release of expanded production capacity, economies of scale will drive the cost down. Based on this, we adjusted the operating revenue of the company from RMB 264.43/306.63/35.602 billion to RMB 265.59/309.30/36.066 billion in 22-24 years, raised the net profit attributable to the parent company from RMB 27.91/33.70/39.14 billion to RMB 28.14/36.72/40.54 in 22-24 years, and adjusted the EPS from RMB 0.90/1.09/1.26 to RMB 0.91/1.18/1.31 in 22-24 years. On April 28, 2022, the share price was RMB 7.83/share, corresponding to the PE of 22 / 23 / 24 years were 9 / 7 / 6x respectively, maintaining the “buy” rating.
Risk tips
The production capacity of live pigs was removed more than expected, the product sales were less than expected, the price of corn, the main raw material, rose more than expected, and the policy was disturbed.
