A broad and continuously growing high-quality track is the cradle of growth stocks.
Warren Buffett attaches great importance to the track, and he believes that choosing the right track is more important than running the track.
In 2024, Warren Buffett's company Berkshire will have a net profit of 690 billion yuan, which is due to his unique insight into the track and the company.
Combined with the investment logic and domestic situation of Palao, the best track of A-shares in the next five years, technology, food and beverage, medical beauty, and health care products are definitely on the list.
Among them, technology has the greatest growth potential, but it is also the most uncertain, once a new technology emerges, it can completely disrupt the entire industry.
Compared with technology, the food and beverage, medical beauty, and health care products tracks not only have growth potential, but also have higher certainty, and there are more investment opportunities behind them.
There is a very powerful company in A-shares, which spans the three major tracks of food and beverage, medical beauty, and health care products, which is equivalent to a three-fold increase in growth, and the prospects are unlimited.
This company is New Novo.
This is a caffeine and acarbose-based company, and the revenue of the two businesses will account for 70% and 15% respectively in 2023, and the other 15% of the revenue will mainly come from health care products Kang vitamin C lozenges.
In the company's business classification, caffeine and acarbose are functional raw materials.
Caffeine is a central nervous system stimulant, which is added to drinks in moderation and has the effect of expelling fatigue and excitating nerves. Therefore, Coca-Cola and Red Bull, which contain caffeine, are both selling well.
In addition, caffeine is antioxidant and is also popular in the field of medical aesthetics. Clinically, caffeine can also be used to treat neurasthenia and coma resuscitation.
Because of its main caffeine, Novo has also become a company with the concepts of functional drinks, medical beauty, and health care products, which has attracted much attention from the market.
So, what are the unique advantages of New Novo in the field of caffeine?
Caffeine is a Class II psychotropic drug, which is strictly regulated by the state and has an extremely high threshold.
At present, there are only 7 domestic companies with production qualifications, namely Xinnuowei, Xinhua Pharmaceutical, Shisi Pharmaceutical, Erkang, Dadeli, Youhua, and Shulan Synthesis.
Novo is the world's largest producer of caffeine.
Although there are a total of 7 companies, the three companies of Xinnuovi, Shisi Pharmaceutical, and Xinhua Pharmaceutical almost monopolize the market.
Among them, Xinnuowei occupies 52% of the national market by itself, and is the absolute leader in the industry.
At the same time, Novo is also the world's largest manufacturer of chemically synthesized caffeine, with a global market share of about 50%, and Coca-Cola, Pepsi, and Red Bull have long thrown an olive branch to it.
According to the prospectus, in 2018, the three major customers of PepsiCo, Coca-Cola and Red Bull contributed 58.7% of the operating income, and the company did not worry about orders at all.
In addition to caffeine, New Novo's acarbose products are also very growing.
The main effect of acarbose is to lower blood sugar and is the mainstream API for the treatment of diabetes.
In fact, acarbose is also an API for weight loss drugs, and the company has the concept of weight loss drugs, and the recent surge in valuation is caused by the market's increased expectations for weight loss drugs.
At present, there are only 4 companies that can produce acarbose raw materials in the country, and Xinnuowei is the largest manufacturer in terms of production capacity, with a production capacity of 280 tons in 2023 and a market share of 39%, which directly opens a gap with Huadong Medicine, Hisun Pharmaceutical, and Livzon Xinbeijiang.
With a strong product layout and stable customers, Xinnuowei has achieved very good results.
From 2020 to 2022, the company's revenue doubled, from 1.317 billion yuan to 2.626 billion yuan, and its net profit increased from 300 million yuan to 726 million yuan, showing strong growth.
Due to the decline in the price of caffeine and the fact that the acquisition of Jushi Biotech has not yet achieved profitability, the company's performance in 2023 and the first quarter of 2024 will decline, but it will not be harmful to long-term operations.
Not only that, but the price of caffeine has fallen, and the company's profitability has become stronger.
In the first quarter of 2024, the gross profit margin of Xinnovo was 46.71%, an increase of 5.91 percentage points compared with 2023.
This is because the price of raw materials upstream of caffeine has dropped even more.
Taking cyanoacetic acid, which accounts for the highest proportion of costs, as an example, from July 2022 to August 2023, the price per ton dropped from 25,000 yuan to 10,000 yuan, a decrease of up to 60%, which was higher than the price reduction of caffeine in the same time period (40%).
This also reflects that the company relies on scale advantages and has a strong ability to control the cost side.
From the perspective of the future, there is still a lot of room for growth for three reasons:
First, caffeine has a growth logic of stable price and increased volume.
In terms of prices, caffeine prices rose in September 2021 due to the shrinkage of upstream raw materials and the shortage of supply, and began to fall in September 2022.
Now that caffeine prices have returned to their historical normal, it is difficult to go down again.
In terms of sales volume, 70% of caffeine demand comes from functional drinks.
According to the data, the market size of functional drinks in mainland China was 111.9 billion yuan in 2019 and is expected to reach 175.6 billion yuan in 2024, with an annualized growth rate of 9.4% from 2019 to 2024.
This is only the domestic market scale, the global scale is much larger, with the rising demand for functional drinks, New Novo will enjoy the industry dividends.
In addition, the company has been in a state of full production and full sales, with a capacity utilization rate of 98% in 2023.
According to the 2023 annual report, the second phase of the caffeine upgrade project is 57% completed, and it is expected to be put into operation in 2024, and the production capacity will be further increased.
Under the expectation of stable prices and capacity expansion, the company's caffeine performance growth in 2024 is certain.
Second, acarbose contributes to the second growth curve.
In the long run, the number of people with diabetes in the world will increase from 537 million in 2021 to 643 million in 2030.
In the short term, under the trend of localization substitution, the company's performance is guaranteed.
Acarbose is a centralized procurement drug, and in the latest centralized procurement, Bayer, which can supply its own acarbose raw materials, did not win the bid, and 50% of the hospital's demand was transferred to domestic manufacturers.
It is reported that at least 4 of the 8 winning bidders have established cooperation with Xinnovo, and the company's short-term performance is guaranteed.
In 2023, the revenue of New Novi Acarbose will be 472 million yuan, a year-on-year increase of 60%, and it is expected to reach 762 million yuan in 2025.
Third, the injection of boulder creatures makes the imagination huge
In August 2023, Novo acquired Jushi Biotech, which is also a subsidiary of CSPC Pharmaceutical Group, and transformed into an innovative drug.
Jushi Biotech has a top mRNA platform in China and has achieved commercialization, in addition, the monoclonal antibody and ADC platforms will also enter the harvest period in 2024.
The acquisition of Jushi Biotech not only increases the performance flexibility of the company, but also diversifies its products and reduces its operating risks.
The caffeine that the company has, Huadong Medicine does not, and the company has acarbose, monoclonal antibody, and ADC that Huadong Medicine has.
In summary, Xinnuowei is the largest manufacturer of caffeine and acarbose in China, with a number of popular concepts such as diet pills, functional drinks, medical beauty and health care products, and has strong growth potential.
The acquisition of Jushi Biotech has taken another step into the field of innovative drugs and improved the imagination space for the future.
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Source: Flying Whale Investment Research