investment points:

thanks to the technological innovation and rapid reduction of synthetic biology, new products in the industry emerge in endlessly. The company will combine self-research and expert cooperation mode, with excellent selection, engineering bacteria amplification and product application promotion capabilities, continue to promote the commercialization of a variety of products. Bio-based alanine products have become the company's niche products, valine, malic acid, PDO, succinic acid, methionine and other products continue to grow.

The company is a leading enterprise in the synthetic biology industry

The company is headquartered in Changfeng, Hefei, specializing in the research, production and marketing of bio-based products. It has four major production bases in Changfeng, Chifeng, Bayannaoer and Qinhuangdao, with an annual production capacity of 32000 tons of L-alanine and 25000 tons of valine, there are also 1.2 tons of beta-alanine and its derivatives, 16000 tons of tri-branched chain amino acids, 50000 tons of bio-based malic acid and 50000 tons of bio-based succinic acid under construction.

alanine business benefits MGDA demand growth continues to strengthen

global dishwasher penetration continues to increase to accelerate the growth of MGDA chelating agent demand, with a compound growth rate of 28% from 2016 to 2023, thus driving the demand for raw material L-alanine to continue to increase. The company innovatively realized the low-cost anaerobic fermentation preparation of L-alanine, quickly realized commercialization, and developed into a global leader in biolaw alanine. The company has also developed beta-alanine, calcium pantothenate and other alanine-derived products to further expand the application of alanine and expand the scale of business.

a variety of amino acids, new materials, daily food and other products continue to grow after the company to achieve the commercialization of valine products, and benefit from the soybean meal reduction replacement trend, valine feed addition demand trend. Under construction of biological succinic acid, PDO new products aimed at hundreds of billions of new materials market, malic acid products are expected to 2.8 million tons of global citric acid market to form a substitute. And the company and Zheng Yuguo academician cooperation, further layout with more than 300 billion yuan scale of methionine market. The company's performance is expected to continue to grow at a high rate, and its ability to continue to commercialize will continue to be verified.

profit forecast, valuation and rating

we expect the company's revenue in 2023-25 to be 19/31/3.9 billion yuan respectively, with corresponding growth rates of 33%/65%/25% respectively, net profit attributable to parent company to be 4.2/5.9/0.8 billion yuan respectively, with corresponding growth rates of 32%/41%/35% respectively, EPS is 2.68/3.77/5.08 yuan respectively, and 3-year CAGR is 36%. Comparable company 2024 average PE is 29 times, in view of the company's synthetic biology industry commercialization ability, and a variety of new products to promote the company's continued growth, we give the company 2024 33 times PE, target price of 124.4 yuan, the first coverage, give "overweight" rating.

risk tips: the risk of new projects not advancing as expected, the risk of large fluctuations in product prices, the risk of bacteria contamination in the production line, the risk of core bacteria being leaked, and the risk of high customer concentration of some products