Key takeaway

The company is currently a leading global platform-based biomanufacturing company built on synthetic biology. Its DC11– DC18 long-chain dibasic acid products dominate the global market. The market share of DC10 has continued to increase since production began in 3Q22, while technological and commercialization breakthroughs have also been achieved for DC9, which has entered the customer sampling stage. Meanwhile, the company continues to expand the application areas of bio-based polyamide and has achieved the scaled production of bio-based piperidine. We are optimistic about the company's continued development of the bio-based materials value chain. This will provide more efficient solutions in multiple areas, including the substitution of petrochemical materials with bio-based materials, the substitution of fossil energy with bioenergy, and lightweighting for energy conservation.

Event

The company released its 1H26 report. In 1H26, it reported revenue of RMB1.900bn, up 13.73% YoY; net profit attributable to shareholders of the parent company of RMB373mn, up 20.75% YoY; net profit attributable to shareholders of the parent company excluding non-recurring gains and losses of RMB329mn, up 10.88% YoY; and net cash flow from operating activities of RMB751mn, up 121.21% YoY, mainly driven by increased collection of sales proceeds amid revenue growth and other factors. In 2Q26, the company reported revenue of RMB1.026bn, up 14.60% YoY and 17.28% QoQ; net profit attributable to shareholders of the parent company of RMB207mn, up 20.56% YoY and 24.92% QoQ; and net profit attributable to shareholders of the parent company excluding non-recurring gains and losses of RMB181mn, up 12.40% YoY and 22.65% QoQ.

Risks:

(1) Risk of losing key technical personnel: The biomanufacturing industry requires companies to possess strong technical capabilities. As the Company expands its business scale and biomanufacturing technologies and processes continue to advance, the continuity and sustained innovation capabilities of its technical team are critical. If potential competitors in the industry offer more attractive compensation and benefits to recruit the Company's personnel in the future, or if other factors cause the Company to lose technical personnel and it cannot arrange suitable replacements or promptly recruit relevant technical personnel, its R&D progress may slow or temporarily stall, adversely affecting its ability to maintain competitiveness and sustain business development.

(2) Risk of leakage or loss of confidentiality of core technologies: Through long-term technological accumulation and exploration, the Company has mastered core technologies related to product series such as biologically produced long-chain dibasic acids and bio-based polyamides. These core technologies underpin the Company's competitive advantages. The Company has protected its core technologies and trade secrets and prevented potential intellectual property disputes by improving its patent portfolio, signing confidentiality agreements with technical personnel, and strengthening software and hardware management. If the Company's core technologies are leaked or otherwise lose confidentiality in the future, allowing competitors to learn or imitate them, the Company's development will be adversely affected.

(3) Risk of lagging technological R&D: In recent years, the investment community, scientific community, and government have attached great importance to synthetic biology, accelerating advances in scientific research and industrialization in this field. If competitors obtain more resources, they may develop technologies that are more advanced than those of the Company in this field. The Company may therefore face more intense market competition, which could affect its profitability.