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Yangtze Business Daily News●Huang Cong, reporter of Yangtze Business Daily

Hehua Group, which had suffered losses for two consecutive years, saw its performance rebound significantly in the first half of the year and its stock price soared.

On the evening of August 11, Hehua Group (000953.SZ) announced that the company's closing price decline deviation value for three consecutive trading days on August 7, August 8, and August 9 exceeded 20%.

However, before that, Hehua shares had closed at the daily limit for six consecutive days. On the news front, on July 29, an explosion occurred at the largest integrated production base of BASF, a global vitamin production giant. Affected by the incident, the prices of some domestic vitamin products rose sharply. Nansong Pharmaceutical's products include vitamin D3 intermediates.

Asset management analyst Liu Guangwen told the reporter of the Yangtze Business Daily that the correction in Hehua Co., Ltd.'s share price is a normal phenomenon. The company's current performance fundamentals are good, but investors should still pay attention to investment risks.

Recently, Hehua Co., Ltd. released its 2024 semi-annual performance forecast, showing that the company expects to achieve a net profit of 2.15 million yuan to 3.2 million yuan in the first half of the year, a year-on-year increase of 502.75% to 797.11%.

Hehua Co., Ltd. stated that in the first half of 2024, due to increased market demand, the sales volume of some pharmaceutical intermediates of its subsidiary Nansong Pharmaceutical increased to varying degrees compared with the same period last year, and operating income and net profit increased accordingly.

The industry said that the stock price correction is a normal phenomenon

On the evening of August 11, Hehua Co., Ltd. issued an announcement on abnormal stock trading fluctuations, showing that its closing price decline deviation value for three consecutive trading days on August 7, August 8, and August 9 exceeded 20% in total. According to relevant regulations, this is an abnormal stock trading fluctuation.

In response, Hehua Co., Ltd. stated that the company's recent production and operation are normal, and there are no major changes in the internal and external operating environment or related businesses.

A reporter from the Yangtze Business Daily found that since August, Hehua Co., Ltd. has issued three announcements on abnormal stock trading fluctuations. Since July 30, the company has hit six consecutive daily limit increases.

On the news front, on July 29, an explosion occurred at the largest integrated production base of BASF, a global vitamin production giant. Affected by the incident, the prices of some domestic vitamin products have risen sharply.

In the 2023 annual report, Hehua Group introduced that its subsidiary Nansong Pharmaceutical has established a multifunctional pilot workshop that can be flexibly adjusted according to process routes and production scales. Its main product is vitamin D3 intermediates.

In addition to the impact of the BASF accident, Huachuang Securities Research Report believes that in the second half of 2023, the prices of multiple vitamins will break through the cost line, and the losses of the entire industry will cause the prices of vitamins to begin to recover. In 2024, breeding profits will begin to turn positive, and downstream acceptance of the prices of vitamins and other feed additives will increase.

Asset management analyst Liu Guangwen told the reporter of the Yangtze Business Daily that the correction in Hehua Co., Ltd.'s share price is a normal phenomenon. The company's current performance fundamentals are good, but investors should still pay attention to investment risks.

Overseas revenue accounted for 20.35%

At present, Hehua Co., Ltd. is mainly engaged in the research and development, production and sales of pharmaceutical intermediates and the commissioned processing and sales of urea.

In 2022 and 2023, Hehua Co., Ltd.'s operating income was 161 million yuan and 187 million yuan respectively, a year-on-year decrease of -1.02% and 16.74% respectively; the net profit was -100 million yuan and -11.5592 million yuan respectively, a year-on-year decrease of -1102.53% and 88.49% respectively, and it has been in the red for two consecutive years.

Regarding the decline in performance in 2022, Hehua Co., Ltd. stated that it was mainly affected by epidemic control.

As for the performance in 2023, Hehua shares stated that the company increased the production scale of contract customized products, but because the sales of some products did not meet expectations, the output was low, the unit production cost increased, and the shutdown losses increased. At the same time, in order to further develop new products, the company increased its investment in research and development and equipment.

Specifically, in 2023, industry competition intensified, and downstream pharmaceutical companies were under great pressure to price, which in turn affected upstream intermediate manufacturers. The market demand for various products of Nansong Pharmaceutical, a major subsidiary of Hehua Co., Ltd., fluctuated to varying degrees. Among them: After the demand for hydroxychloroquine side chain declined in 2022, it showed a recovery growth in 2023, with annual sales revenue of 66.8148 million yuan, up 199.27% ​​from the previous year. However, the market demand for chloroquine side chain and dioxane products has been greatly reduced, mainly based on the sales of last year's inventory, with annual sales of only 11.7322 million yuan, down 51.94% from the previous year.

It is worth mentioning that in 2023, Hehua Co., Ltd.'s overseas operating income reached 38.1553 million yuan, a year-on-year increase of 82.21%, and the proportion of operating income increased from 13.04% in the previous year to 20.35%.

Non-GAAP net profit increased by more than 276.63% in the first half of the year

After entering 2024, Hehua Co., Ltd.'s performance showed a significant recovery.

In the first quarter of 2024, Hehua Co., Ltd.'s operating income reached 61.9178 million yuan, a year-on-year increase of 7.11%; the net profit loss was 1.16 million yuan, a year-on-year increase of 26.10%.

Recently, Hehua Co., Ltd. released its 2024 semi-annual performance forecast, showing that the company expects to achieve a net profit of 2.15 million yuan to 3.2 million yuan in the first half of the year, a year-on-year increase of 502.75% to 797.11%; non-net profit of 2.05 million yuan to 3.10 million yuan, a year-on-year increase of 276.63% to 469.54%.

Hehua Co., Ltd. stated that in the first half of 2024, due to increased market demand, the sales volume of some pharmaceutical intermediates of Nansong Pharmaceutical increased to varying degrees compared with the same period last year, and operating income and net profit increased accordingly.

From 2021 to 2023, Hehua Co., Ltd.'s R&D expenses were RMB 7.7033 million, RMB 4.2793 million and RMB 6.0957 million, respectively, accounting for 4.75%, 2.66% and 3.25% of its operating income, respectively.

During the same period, Hehua Co., Ltd.'s sales expenses were RMB 871,400, RMB 616,500 and RMB 801,800 respectively.

On July 16, Hehua Co., Ltd. issued a share repurchase report showing that the total amount of funds for the company's share repurchase was not less than RMB 15 million (inclusive) and not more than RMB 25 million (inclusive), and the repurchase price was not more than RMB 3 per share (inclusive).

On August 6, Hehua Co., Ltd. announced that as of July 31, 2024, the company had repurchased a total of 878,100 shares through a dedicated securities account for share repurchases in a centralized bidding transaction, accounting for 0.24% of the company's total share capital. The highest transaction price for the shares purchased was 2.64 yuan/share, the lowest transaction price was 2.47 yuan/share, and the total transaction amount was 2.2396 million yuan (excluding transaction fees).

It should be noted that the current share price of Hehua Co., Ltd. exceeds the maximum repurchase price of 3 yuan per share, and there is uncertainty as to whether the company can complete the repurchase plan.