Summary: On 6 March, Meihua Group released the performance report for 2022, which shows the revenue of its animal nutrition amino acids segment for 2022 climbed by 26.24% YoY.

On 6 March, Meihua Holdings Group Co., Ltd. (Meihua Group) released the performance report for 2022, which shows the company's operating revenue for 2022 delivered a year-on-year increase, and the revenue of its animal nutrition amino acids segment for 2022 climbed by 26.24% YoY.

Major financial metrics

• Operating revenue: USD4.03 billion (RMB27.94 billion), up 21.14% YoY;
• Operating costs: USD3.01 billion (RMB20.92 billion), up 12.54% YoY;
• Net profit attributable to equity holders of the Company: USD634.92 million (RMB4.41 billion), up 83.42% YoY;
• Net profit attributable to equity holders of the Company after deduction of non-recurring loss/profit: USD608.10 million (RMB4.22 billion), up 101.69% YoY.

The major reasons for year-on-year growth in operating revenue for 2022:

• The production capacity of third-phase lysine project of Jilin Meihua Amino Acid Co., Ltd. (Jilin Meihua), a subsidiary of Meihua Group, was activated. As a result, the sales volume of lysine went up and revenue of major business segment increased.
• The sales volume and price of main product gourmet powder (MSG) both went up; the prices of lysine, xanthan gum, and other feed-related products went up, which led to an increase in main business segment's revenue.

The major reasons for year-on-year rise in operating costs for 2022:

• As the sales volume of lysine and gourmet powder increased, the costs rose along.
• The prices of raw materials rose year on year, which resulted in an uplift in costs. Despite the various degrees of increases in prices of major raw materials, the main product prices' increase rates, which involve gourmet powder, lysine, xanthan gum, and other feed-related amino acid products, are higher than increase rates of raw material prices; thus, the increase in operating costs was lower than that in operating revenue.

Results of major business segments for 2022:

• Animal nutrition amino acids segment (feed-grade amino acids):
• Operating revenue: USD2.15 billion (RMB14.91 billion), up 26.24% YoY;
• Gross margin: 23.20%, up 3.22 percentage points YoY.
• The growth in operating revenue was mainly owing to activation of production capacity of Jilin Meihua's third-phase lysine project, Meihua Group's accurate understanding of market conditions, increase of lysine price, and uplift in sales volume as well as prices of bulk raw materials (by-products). The growth in gross margin was mainly attributed to uplift in prices of lysine and bulk raw materials (by-products).
• Human pharmaceutical-use amino acids segment (pharmaceutical-grade amino acids):
• Operating revenue: USD79.29 million (RMB550.27 million), down 2.74% YoY;
• Gross margin: 33.81%, up 7.71 percentage points YoY.
• The decline in sales volume of glutamine and valine led to the decrease in operating revenue. The growth in gross margin was mainly contributed by the uplift in prices of glutamine and proline.
• Flavour enhancers segment:
• Operating revenue: USD1.46 billion (RMB10.10 billion), up 18.56% YoY;
• Gross margin: 21.68%, up 6.39 percentage points YoY.
• The increase in operating revenue was mainly because of price rise of main products monosodium glutamate, nucleotide, and xanthan gum. Meanwhile, the rise in selling prices of main products also drove up gross margin.

"Amino Acid+" development strategyIn 2022, Meihua Group ramped up spending in the construction of strain development platform, strain iteration and potential products & technology reserves, which are based on synthetic biology.

• Regarding platform construction, the company has built a chassis bacteria development platform for Escherichia coli, Corynebacterium glutamicum and Bacillus and a technology platform based on enzyme bio-transformation.
• In terms of strain iteration, the company purchased a DNA sequencer in order to build its own genetic sequence database for strain modification. Meanwhile, by integrating self-established high throughput screening methods, the company is able to construct 2,000 engineering strains every month and complete the iterative improvement of performance of a generation of strains in 6–9 months.
• With regard to potential products and technology reserves, the company has the ability to design afresh and efficiently construct a new generation of production strains for polysaccharide and nucleosides such as inosine, guanosine and adenosine. Moreover, the company will further extend the application of synthetic biology to the production of other pharmaceutical intermediates, functional foods and functional sugars.
• As regards the protection of intellectual property rights, Meihua Group has been stepping up efforts to protect its intellectual property rights by applying for patents of every product. In 2022 (Jan.–Dec.), 27 invention patents were granted to Meihua Group, 2 of which were granted by Japanese patent authority. Additionally, applications for 12 new patents were submitted by the company in 2022.
• As for product R&D, Meihua Group established production technology research institute in 2022, which carries out research that centres on the production processes of whole industrial chain. So far, the said research institute has nourished a group of engineering teams with considerable experience of building bio-fermentation production lines. That enabled Meihua Group to have unique technological advantages and techniques in the respects of engineering design, engineering construction, management and control of technical indexes, environmental protection, and comprehensive recycled use.