Back to a big tree to enjoy the cool, but there is no free lunch in the world.

According to the semi-annual report released by 300858.SZ on Aug. 1, the income and return net profit in the first half of 2023 were 140 million yuan and 40 million yuan respectively, down 10.79% and 10.01% respectively from the same period last year.

One of the main reasons is the decline in the income level of compound food additives, which has affected the performance of Ketuo Biology.

In the first half of 2023, income mainly used for compounding food additives generated 42 million yuan, down 48.39% from the same period last year, accounting for 30% of the income.

"compound food additives are the company's traditional basic business. Affected by the rise in the downstream consumer market and raw materials, there are certain fluctuations in operating income and gross profit, which puts the company's performance under great pressure in the short term." Kotto biology explained.

Among them, the largest customer of Ketuo Biological compound food additive is Mengniu (2319.HK).

In 2020, the two signed a strategic cooperation agreement on compound food additives. Mengniu promised to purchase no less than 70% of the former's demand for compound thickener products from Ketuo, while the latter needed to reduce prices every year.

This means that behind this increase in the price of raw materials, KotoBio is unable to raise the price of Mengniu, a big customer.

The challenge is more than that.

The agreement between the two is about to end at the end of 2023, when Mengniu will renew the purchase order with Ketuo Bio, which will also have a bearing on the revenue growth of compound food additives.

However, Ketuo's edible probiotic products are growing rapidly and have taken up half of their income, partly making up for the shrinking share of compound food additives. In the first half of 2023, the income of edible probiotic products was 86 million yuan, accounting for 61.43%.

The market is continuing to pay attention to whether the growth of edible probiotic products is sustainable.

The time for hidden worries is coming.

In the compound food additive business used to thicken yogurt before listing, Ketuo Bio, which is deeply bound to Mengniu, is ushering in a moment of hidden worry exposure.

According to the semi-annual report, the income and net profit of Ketuo biology in the first half of 2023 were 140 million yuan and 40 million yuan respectively, down 10.79% and 10.01% respectively from the same period last year.

Excluding the results in the first quarter, Ketuo's income and return net profit in the second quarter of this year were 68 million yuan and 20 million yuan respectively, of which revenue fell 5.56% from the previous month.

As one of the main industries, the decline in the income level of compound food additives is an important reason for the decline in the biological performance of Ketuo.

In the first half of 2023, income mainly used for compounding food additives generated 42 million yuan, down 48.39% from the same period last year, accounting for 30% of the income.

"compound food additives are the company's traditional basic business. Affected by the rise in the downstream consumer market and raw materials, there are certain fluctuations in operating income and gross profit, which puts the company's performance under great pressure in the short term." Kotto biology explained.

The main raw materials of compound food additives are modified starch, pectin and Agar, of which the price of modified starch rose by about 44% in 2023 compared with the same period last year, which also affected the gross profit margin of high business, which was only 31.24% in the first half of this year, down 14.42% from the same period last year.

Some institutional personages believe that the decline in this part of income is expected to narrow.

"as consumption continues to recover, the decline in income is expected to narrow in the second half of the year." Founder Securities Trade Retail Industry analyst Wang Zehua pointed out.

In the long run, it is still uncertain whether Ketuo's compound food additive business can achieve growth.

The biggest customer of Ketuo Biology's compound food additives is Mengniu. Public data show that Mengniu's purchases account for more than 70% of Ketuo's compound food additive income.

In December 2020, Ketuo Biology and Mengniu signed a strategic cooperation agreement, stipulating that the share of compound thickener products purchased by Mengniu from 2021 to 2023 is not less than 70% of the demand of the former, while the latter promises to reduce prices by 3%, 3% and 3% per year, respectively.

With the end of the cooperation approaching, whether Mengniu will renew the purchase agreement with Ketuo Biology is related to the income trend of compound food additives.

In fact, Mengniu is also developing its own compound food additives, and the risk of Ketuo being replaced is also high at the top.

Mengniu applied for a patent for "fermented milk and its preparation method" in July 2022, according to the official website of the State intellectual property Office (ID:TradeWind01).

The invention relates to the field of food, in particular to a fermented milk and a preparation method thereof. The fermented milk contains diacetyl tartrate monoglyceride 0.05% Mel 0.15% starch 0.15% Mel 0.25% and pectin 0.25% Mel 0.35%. The fermented milk of the invention can effectively avoid whey precipitation and de-cooling caking phenomenon, has strong stability and has a long shelf life. " This is how Mengniu described the patent.

The patent of Mengniu fermented milk is similar to that of Ketuo's "KY series" fermented milk (one of the compound food additives)-KY series fermented milk can improve the gel and consistency of fermented milk, make the product have strong plasticity and strong shock resistance in normal temperature transportation.

However, if you can get rid of the dependence on Mengniu, it may not be a bad thing for Kotuo biology.

Although Mengniu and Ketuo did not sign an exclusive agreement, Koto admitted in a question and answer to investors that the strategic cooperation agreement also limited the possibility of expanding 600887.SH.

It is worth noting that Yili also has the production process of compound food additives such as fermented milk.

From this point of view, the future growth prospect of Ketuo biology's compound food additive income is still unclear.

There has also been a sharp decline in income in the business of animal and plant microecological agents, which are mainly aimed at the dairy industry. In the first half of 2023, the income of animal and plant microecological agents was only 8 million yuan, down 54% from the same period last year.

"during the reporting period, animal and plant microecological agents were affected by the downturn in the aquaculture industry, resulting in lower-than-expected business development." Kotto biology explained.

In order to boost the income of the animal and plant microecological preparation sector, Ketuo Biology has signed a strategic cooperation with Xin Ruipeng, the leader of the pet hospital, to cut into the probiotic pet industry.

Trade wind (ID:TradeWind01) wants to Ketuo biology to verify the specific progress of cooperation, but as of press time has not received a response.

The second curve "carrying the flag"

Probiotics with the function of maintaining the balance of intestinal flora has become the standard configuration of many food raw material lists.

In recent years, Mengniu, Yili and other dairy enterprises, as well as the emerging nutrition substitute milkshake brand Wonderlab, have continued to expand capacity on the probiotic food track.

This brings more opportunities to Ketuo's business of edible probiotic products.

In the first half of 2023, Ketuo's edible probiotic products generated 86 million yuan, accounting for 61.43%, which has exceeded the traditional business of "compound food additives".

"the sales of edible probiotic products have exceeded that of compound food additives, becoming the business sector with the largest share of revenue, the strongest profitability and the most obvious market competitive advantage." Koto biology said.

The business also supports most of Ketuo's net profit. According to the semi-annual report, Jinhua Yinhe Biotechnology Co., Ltd., a subsidiary in charge of edible probiotic products, made a net profit of 36 million yuan in the first half of 2023, an increase of 73.06% over the same period last year. It accounts for 90% of the parent company's net profit.

It is worth mentioning that in the same period, the gross profit margin of this category has reached 64.77%, an increase of 0.71 percentage points over the same period last year.

Many analysts believe that Ketuo's probiotic business is expected to continue to grow.

"with the rapid development of the probiotic industry, the trend of domestic substitution is prominent, and the company is expected to benefit as a domestic probiotic enterprise. We expect the company to achieve a net profit of 1.50pm 2.26 / 298 million yuan from 2023 to 2025. " Caitong Securities Food and Beverage analyst Sun Yu pointed out.

Ketuo organism does have certain advantages in the layout of probiotics.

By the end of June 2023, Ketuo has a resource bank of more than 20,000 strains of probiotics, which is the largest probiotic bank in Asia.

Ketuo's planning for the probiotic business can be described as "walking on two legs".

In terms of B-end customers, Ketuo's edible probiotic products as raw materials have been sold to dairy products, pharmaceutical and other enterprises, and also provide compound edible probiotic formulations for Wonderlab, Yuanqi Forest and other beverage enterprises.

However, Ketuo is not reconciled to making wedding clothes for others, and at the same time, it has also established independent brands such as "Yi Shiyou" to sell probiotic products directly to end consumers. There is a wide range of products, including 10 different ready-to-eat probiotic solid drinks, such as women's and men's.

Despite all kinds of resource endowment advantages, it may not be easy to move from side B to side C. The sales cost of Ketuo Biology in the first half of 2023 was 16 million yuan, an increase of 33.96% over the same period last year.

"it is mainly due to the increase in advertising investment during the reporting period." Kotto biology explained.

It remains to be seen whether the probiotics of Ketuo can directly enter the terminal market.

Or based on the resource advantages of probiotics, Ketuo Biology has been favored by social security funds and a number of public offerings.

By the end of June 2023, the national social security fund 17031 portfolio and the national social security fund portfolio held 3.36% and 2.10% of the shares respectively, and the total market value of the positions could reach 75 million yuan. The proportion of shares held by Penghua emerging industry mixed securities investment fund and Dacheng gem two-year regular opening hybrid securities investment fund reached 10.33% and 1.01% respectively.