Plum Blossom Group: No Potentilla monosodium glutamate and amino acid or double reverse

Performance slightly lower than expected

Platinum shares in 2013 operating income of 7.78 billion yuan, an increase of 4.2%; due to weak market demand, product prices decline in the reporting period, attributable to shareholders of listed companies net profit of 4.04 billion yuan, down 33.58% Income 0.13 yuan, slightly lower than we expected 0.15 yuan.

development trend

MSG industry consolidation is nearing completion, 2014 industry reversal will help performance. During the reporting period, monosodium glutamate and glutamic acid achieved operating income of 3.64 billion yuan, accounting for 46.79% of total sales revenue, but due to competition and other factors affected by industry competition, large monosodium glutamate prices decreased by 10.94%, glutamic acid prices fell 10.4 %, Gross margin of products decreased by 3.39% year on year. This round of industry consolidation began in 2011, the current domestic 11 MSG production enterprises have 33% of the capacity loss of nearly two years. In the context of increasingly stringent environmental protection, we expect the integration of monosodium glutamate industry is about to complete, a new round of the cycle will start in 2014. Plum Group accounted for 20% of domestic MSG production capacity ranked second, will significantly benefit from the monosodium glutamate prices rose to double the performance.

Avian flu will gradually fade, amino acid sales will rebound. 2013 due to H7N9 and other events, the overall farming situation in the doldrums, product prices into the historic low, amino acid market demand. Compared with 2012, the average selling price of threonine decreased by about 746 yuan per ton, gross margin decreased from 25.93% to 14.67%. We expect that with the avian flu through the transition, the impact will gradually fade, with the company's expansion of production capacity of amino acid products, the company cost advantage will be more prominent.

New products to further optimize the product structure, xanthan gum and pullulan polysaccharides began to contribute to profits. Plum Group's high-margin new products will begin to contribute gradually in 2014. The company successfully developed a breakthrough in the technical difficulties of pullulan polysaccharide, 300 tons of production capacity has been completed, the company's pharmaceutical raw materials to become a new profit growth point. While the price of xanthan gum is expected to fall but the profit margin is still higher than the average level, will gradually start to contribute to the company profits.

Profit forecast adjustment

We cut the 2014 EPS to 0.25 yuan, the range of -21%. We assume that the price of monosodium glutamate 14/15 were 8500 yuan and 8800 yuan, amino acid sales increased by 20%. 2015 profit forecast is 0.29 yuan.

Valuation and advice

Maintain a prudent recommendation rating, the current share price corresponding to 21 times 21 times PE, target price of 6.6 yuan.

Risk Tip: Industry consolidation is lower than expected; demand growth is lower than expected.


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Zip code: 214111

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