On April 10, Laine Biotech (002166.SZ) released its 2023 annual report. The annual revenue was 1.494 billion yuan, a year-on-year increase of 6.65%. Among them, the single-quarter performance in the fourth quarter has improved significantly, with revenue of 600 million yuan, a year-on-year increase of more than 40% in a single quarter, and a quarter-on-quarter increase of 60%, and the gross profit margin of core single natural sweeteners has increased by 12 percentage points compared with the average level of the first three quarters, and the company's performance has shown obvious signs of rapid and substantial reversal.
Analysts pointed out that with the steady growth of demand for natural sweeteners at home and abroad, the company's new production capacity is online, and the company's performance is expected to achieve new breakthroughs.
In addition, in the field of industrial hemp, which the market is concerned about, many countries have recently released relaxation signals, and the company's investment in the largest industrial hemp extraction plant in the United States is also expected to obtain greater business opportunities and become a new growth point for the company.
01 Terminal consumption recovery The market is expected to continue to recover
According to the annual report, the company's net profit attributable to the parent company in 2023 will be 82.511 million yuan, a year-on-year decrease of 53.84%.
It is reported that Rhine Biotech is one of the main manufacturers of plant sweeteners in China, including monk fruit extract, stevia extract and other sugar substitute products, at present, there are many types of sugar substitutes, and more than 5% of China's sugar substitute products are used for export. The traditional high-intensity sweetener sucralose is in the stage of capacity clearance, the price is at the bottom range, and other new sweeteners such as monk fruit extract and stevia have broad market prospects. The recovery of terminal consumption + the opening of the overseas replenishment cycle will boost the export of sugar substitutes, and Chinese sugar substitute companies represented by Rhine Biotech are expected to benefit.
The above phenomenon is reflected in the performance of Rhine Biotech. The annual report shows that in 2023, Rheinland's performance will first decline and then rise, with revenue of 600 million yuan in the fourth quarter, a year-on-year increase of more than 40% in a single quarter and a quarter-on-quarter increase of 60%, driving the company's revenue to turn from negative to positive year-on-year for the whole year.
If the performance of Rhine Biotech in 2023 is "first suppressed and then raised", then the key word in 2024 will be "upward breakthrough". On the one hand, the world is setting off a "sugar reduction trend", the market demand for food and beverages is strong under the trend of "sugar-free", and the rapid expansion of the downstream market has led to the acceleration of the supply and demand of upstream sweeteners; On the other hand, the substitution of sweetener stock market is also expected to be a powerful booster to promote the accelerated expansion of natural sweeteners. Previously, the World Health Organization classified aspartame as a possibly carcinogenic to humans, forcing some sugar-free foods and beverages to use natural sweeteners.
02The construction of new competitiveness continued to improve, and the advantages of production capacity and technology were highlighted
The realization of revenue decline and then increase is not entirely due to the recovery of demand in the natural sweetener industry, but also contains the persistence of Laine Biotech in its own strategic determination and the courage to self-innovate inward.
Looking back on the whole year of 2023, Laine Biotech has made great efforts to build new competitiveness, focusing on the construction of new factories, synthetic biotechnology, strategic cooperation, formula application, etc., to build many new competitive advantages.
In terms of the construction of the new plant, Rhine Biotech has completed the main construction of the new factory for the professional extraction of stevia, the main workshop of the extraction has entered the commissioning stage, and the construction of other auxiliary workshops and warehouses has entered the stage of internal facility construction and equipment installation. In addition, the construction of the synthetic biology production workshop is also expected to be put into operation this year. The increase in production capacity will further enhance the comprehensive competitiveness of Laine Biotech.
In terms of synthetic biotechnology, the company has successfully promoted the achievement of the R&D goals of mogroside and steviol glycoside synthesis biology, implemented and completed the pilot test of the microbial enzyme conversion process of stevia extract products, and led the R&D and industrialization of biological polysaccharides, peptides and other component products. It can resist the impact of raw material price fluctuations to a certain extent.
In addition, regarding the implementation of the five-year contract with Firmenich, which is highly concerned by the market, Laine Biotech stated in its annual report that both parties confirmed the completion of the contract execution. In order to further enhance the synergy of future cooperation between the two parties, the new five-year agreement between the two parties has been officially launched in 2024, and it is worth mentioning that the joint R&D technical team between Rhine Biotech and DSM-Firmenich has been established, which is expected to accelerate the development of domestic natural sweetener customers and markets in the future.
During the reporting period, Laine Biotech successfully passed the review of "National Key Leading Enterprise of Agricultural Industrialization" and "National Specialized and New 'Little Giant' Enterprise", and won the honorable titles of "Top 500 Chinese Agricultural Enterprises in 2023", "Top 100 High-tech Enterprises in Guangxi in 2023" and "Guangxi Gazelle Enterprise".
03The global hemp policy continues to be relaxed, and the industrial hemp business will become the "engine" of Rheinbio's growth
Laine Biotech has been deeply engaged in the development strategy of "large single product + N" for many years, and is about to usher in the moment of blossoming and fruition. In addition to the continued steady growth of natural sweeteners, the industrial hemp business and tea extraction business also showed great development potential.
Take, for example, the industrial hemp business. As an emerging field of Rhine Biotech, the industrial hemp business has recently been positively affected by the opening up of global policies. In 2023, many countries and regions have adjusted and relaxed the regulatory policies for industrial hemp, opening a new door for the legalized application of industrial hemp.
Image source: Layin Biotech Annual Report
For example, Germany's cannabis law came into force on April 1, 2024, making it the second G7 country to legalize and regulate adult cannabis use nationwide. At the end of last year, Japan approved the revision of the 75-year-old Cannabis Control Law, which was an important step towards marijuana reform. The Cannabis Control Law establishes a unique market position if Japan continues to allow CBD and other cannabinoids (such as CBG and CBN and related foods) to be sold in retail stores after the announcement of new THC regulations. This will significantly diversify the market, allowing consumers to see more new products such as CBD-fortified foods, beverages and even cosmetics entering the market with full imagination.
For Laine Biotech, it has taken the lead in the development of the industry. It is reported that the company's industrial hemp extraction plant capacity in the United States ranks the largest in the United States, and has become one of the few industrial hemp extraction manufacturers in the United States to achieve large-scale and industrial production. The annual report mentions that Rhine Biotech is accelerating the layout of the large-scale and faster-growing industrial hemp atomization terminal market, the relevant operating companies have been registered, and D8 and other products have formed part sales, which is expected to achieve a significant reduction in the loss of industrial hemp projects in 2024 through this business. With the further opening of policies and the growth of market demand, Laine Biotech is expected to achieve new breakthroughs in the field of industrial hemp and become an important performance growth engine.
The tea extraction business is equally excellent. According to the annual report, in 2023, the company's tea extraction business will achieve operating income of 179.1209 million yuan, a year-on-year increase of 9.65%. At the same time, the annual report mentioned that in the future, it will make every effort to start the pace of expansion in the US market, and has successfully reached friendly cooperation with some important food and beverage brands, which is expected to inject new vitality into the diversification of the performance of Laine Biotech.
Laine Biotech said that the beginning of 2024 will continue the development trend of stable growth in the fourth quarter of last year and achieve a good start. In 2024, the company will take "steady growth" as the main keynote, effectively grasp the development direction of the main business of core plant extraction, rely on leading comprehensive advantages, grasp market opportunities, further build core capabilities, and consolidate its leading position in the industry.