During the epidemic, the United Nations has repeatedly warned that the world may fall into a food crisis, and the inflation factor is added. It is expected that the overall price trend of agricultural products, food, and aquaculture will show strong in the next two years, which will benefit the performance of these two chemical segments.
Food and feed additives price elasticity
Vitamins are a class of trace organic compounds necessary for humans and animals. There are 13 kinds of common vitamins, among which VA, VB series, VC, VE, VD3, and VK3 are the main varieties. Vitamins are widely used in feed, medicine, cosmetics and food industries. Domestic vitamin supply and demand are expected to maintain a steady growth rate of about 6.5%, with little income elasticity; since the cost of feed accounts for only 2%, the price elasticity is relatively large, and the fluctuation of industry profits is mainly due to price fluctuations.
The vitamin industry is highly concentrated. DSM, BASF, Xinhecheng, and Zhejiang Pharmaceutical accounted for 65% of the VA and 85% of the VE market; DSM, CSPC, and Northeast Pharmaceutical accounted for 70% of the VC market; Siman, Xinhecheng, Jindawei occupy the VD3 market, and Brother Technology and other companies occupy the VK3 market. Affected by the epidemic, vitamin varieties with a relatively high proportion of overseas production have experienced a wave of growth during the year. At present, due to poor overseas demand, they have fallen to the bottom area. The restart of the sector requires price tracking. In addition, production capacity of DSM, BASF, etc. is often suspended due to force majeure, which will cause the prices of vitamin A and E to skyrocket in the short term, forming a strong catalyst for the stock price of listed companies.
Xinhecheng. A leading domestic vitamin company with VA and VE production capacity of 120,000 tons, ranking first and second in the world. The company has opened up the entire industrial chain and is the only domestic manufacturer that has mastered key intermediates. The company has built a new production capacity for methionine, which also faces the feed industry; at the same time, it extends horizontally into the field of flavors and fragrances. The production capacity of linalool ranks second in the world. In addition, the company has modified resin and nutritional products business.
Zhejiang Medicine. The company's VE production capacity is 20,000 tons, ranking first in the country for natural VE, and VA and β-carotene are rapidly industrialized. In addition, the company has a number of drug production and new drug projects under development. The details are omitted.
Yifan Pharmaceutical. The company's core product is VD3 (calcium pantothenate). After the epidemic, the price of calcium pantothenate fell to the bottom due to the decline in overseas demand. The price recovery needs to wait until overseas demand strengthens. The company's more focus is on preparations and innovative drugs.
Adisseo. The company is the world's second largest methionine producer (chemical synthesis method) with a production capacity of 480,000 tons. The expanded 180,000 tons project is expected to be put into operation in 2022, with a high moat. Another VA capacity is 5,000 tons. The company's goal is to become a global leader in animal nutrition specialty products through product line extension and mergers and acquisitions.
Brother Technology. The company is a leading domestic VB1/VK3/VB5 enterprise, and its performance also declined due to the fall in prices in the third quarter. The company has built new hydroquinone and its derivatives, iodine contrast agent projects, and will increase funds for 30,000 tons of natural fragrance projects. The extension of the product line can provide growth and stabilize the impact of vitamin price fluctuations on the company's performance.
In addition to feed vitamins, edible flavors, fragrances, and sweeteners are also potential consumer markets. Flavor and fragrance-related companies include Huabao, Bairun, Xinhua, Cosi, etc., and will not be expanded. The main listed companies for sweeteners include Jinhe Industry and Jindawei.
Jinhe Industry, the leader in food additives. The main products are acesulfame K and sucralose, ranking first and second in the world. New sweeteners will gradually replace traditional saccharin, cyclamate and aspartame. The company's products have great potential for substitution. In addition, under the trend of food and beverage de-saccharification, the scale of downstream demand will continue to expand and increase. The company also has a maltol spice business, with a global market share of over 50%. The company's basic chemical and fine chemical products are diverse, and there are new projects in food additives and pesticide/pharmaceutical intermediates.
Jindawei, the leading food nutrition enhancer. The main products include Coenzyme Q10, DHA, ARA, VA, VD3, etc. Coenzyme Q10 has the world's largest production capacity, mainly used in the field of health products, and the price has risen sharply recently. The company has also deployed NMN anti-aging products, which are a variety of health care products with greater market potential. The acquisition of Chengxin Pharmaceutical on December 2 shows that it is strategically optimistic about NMN. The vitamin business is similar to other companies. New production capacity will be launched next year, depending on price elasticity.
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