Event Description

On October 30, 2024, Cathay Biotech released its third quarter report for 2024. In the first three quarters of 2024, the company achieved operating income of 2.215 billion yuan, a year-on-year increase of 41.49%; the net profit attributable to the parent company was 345 million yuan, an increase of 9.97% year-on-year; The net profit after deducting non-attributable to the parent company was 335 million yuan, an increase of 25.51% year-on-year. The company's operating income in 2024Q3 was 771 million yuan, up 44.06% year-on-year and 1.45% month-on-month; the net profit attributable to the parent company was 98 million yuan, up 35.69% year-on-year and down 31.27% month-on-month; The net profit after deduction was 0.96, up 84.38% year-on-year and down 30.10% month-on-month.

Operating income in the third quarter hit a record high, and performance was slightly under pressure

sequentially The volume of sebacic acid drove revenue growth, and the performance was slightly pressured by exchange rate fluctuations. The company's new product sebacic acid volume is increased, and the sales volume of long-chain diacid has increased sharply compared with the same period last year. Affected by the fluctuation of foreign exchange earnings, the performance declined slightly from the previous quarter. At the same time, benefiting from the company's grasp of market opportunities and increasing product sales, the company increased R&D investment in 24Q3, and R&D expenses increased by 70.79% year-on-year and 24.37% month-on-month. The company adheres to the R&D-driven strategy, continues to make technological breakthroughs and innovative changes, and constantly lays out new products.

Improving quality and efficiency, emphasizing returns, and repurchasing demonstrates confidence in development

It is planned to repurchase more than 10 million yuan of shares and lay out bio-based polyamide spinning materials. On August 30, 2024, the company invested 30 million yuan to establish Anhui Hexian New Materials Co., Ltd., holding 100% of the shares, which belongs to the textile industry, and this investment will further enhance the company's bio-based polyamide spinning material production capacity. On October 22, the company announced that it intends to repurchase shares in a centralized bidding transaction, with a total repurchase fund of not less than 10 million yuan and no more than 20 million yuan, and the repurchase price does not exceed 67 yuan per share, which is not higher than 150% of the average trading price of the company's shares in the 30 trading days before the board of directors passed the repurchase resolution, and the repurchase period is within 12 months from the date of the board of directors' deliberation and approval of the repurchase plan.

New quality productivity empowers future industrial development, and new projects are steadily

advancing The bio-based material industry cluster is steadily being built, and the production capacity will be gradually released. Liu Xiucai, chairman and president of the company, said at the Hefei Biomanufacturing Industry Development Conference that under the cooperation framework of "Hefei-China Merchants Innovation and Technology-Cathay Biotech", Cathay Biotech plans to engage in three aspects of business, including: the development of application scenarios of bio-based materials, the construction of bio-based material industry clusters, and the construction of a high-throughput "AI+BT" R&D platform for artificial intelligence robots. At present, the company's Wusu technology project with an annual output of 30,000 tons of long-chain diacids and 20,000 tons of long-chain polyamide has been completed in 2023, laying a production capacity foundation for downstream applications and business expansion. Bio-based material related industrial projects, such as an annual output of 500,000 tons of bio-based pentanediamine, an annual output of 900,000 tons of bio-based polyamide and an annual output of 300,000 tons of bio-fermented sulfate projects are under construction.

Investment Advice

Due to the fluctuation of the expense side in the second half of the year, we expect the company's net profit attributable to the parent company from 2024 to 2026 to be 473, 655 and 857 million yuan respectively (the previous value was 5.27, 7.12 and 925 million yuan), with a year-on-year growth rate of 29.1%, 38.4% and 30.8%. The corresponding PE is 57, 42, and 32 times, respectively. Maintain "Buy" rating.



Risk Warning (1) Macroeconomic and industrial policy fluctuation risk;

(2) the risk of uncertainty in the construction progress of new projects, the progress of products reaching production and sales; (3) import and export policies such as tariffs and risks of changes in the international trade environment; (4) Exchange rate fluctuation risk.