[Fine Chemicals] Stop buying stocks on gut feeling! Using Zhejiang NHU as an example, six steps to understand an industry

[Fine Chemicals] Stop buying stocks on gut feeling! Using Zhejiang NHU as an example, six steps to understand an industry

① High technical barriers, complex processes. Vitamin synthesis involves multiple chemical reactions, and the production technology for intermediates like citral is monopolized by a few companies. BASF is strong precisely because it has the world's largest citral production facility. NHU's growth from a small-county company to a global leader relied on decades of technical accumulation and independent R&D. It now produces 8 of the 13 common vitamins, making it one of the domestic vitamin companies with the most complete product range and the strongest technology.

② Scale effect plus cost advantage. Vitamins have a commodity nature—it's all about who has larger capacity and lower costs. NHU's revenue grew from 3.6 billion yuan in 2012 to 15.1 billion yuan in 2023, a compound annual growth rate of 14%, driven by continuous capacity expansion and cost reduction.

③ Integrated industrial chain. NHU doesn't just make vitamins; it extends upstream to produce its own intermediates and downstream into flavors and fragrances, methionine, and new materials. This integration gives it stronger risk resistance and more stable profits.

Step 5: External factors—black swans and gray rhinos. The most exciting thing about the vitamin industry is the huge impact of external shocks on prices. Because of high industry concentration, if a major plant has an accident, prices can double or even triple.

Case 1: The 2024 BASF explosion and fire. On July 29, 2024, an explosion and fire occurred at BASF's Ludwigshafen plant in Germany. That site has vitamin A capacity of 14,400 tons per year (about 26.7% of global capacity) and vitamin E capacity of 20,000 tons per year (about 13.8% global). On August 7, BASF announced suspension of supply for vitamin A, E, and other products, with VA expected to restart in April 2025 and VE in July 2025. The result? Vitamin A prices soared from about 88 yuan/kg in July to 230 yuan/kg, a rise of over 162%. Vitamin E went from about 83 yuan/kg to 150 yuan/kg, up over 80%. NHU, as a domestic leader, benefited directly—its profit surge in 2024 and the first half of 2025 largely came from this wave of peer assistance.

Case 2: DSM's gradual exit. DSM has been divesting its vitamin business: closing its Jiangshan vitamin C plant in 2023, its Shanghai Xinghuo vitamin B6 plant in 2024, and announcing the sale of its animal nutrition division in the second half of 2025. As international giants exit, Chinese companies' market share naturally rises. From January to September 2024, China's vitamin A exports grew 31.23% year-on-year, and vitamin E exports grew 32.53%.

Case 3: Industry maintenance and seasonality. There's an unspoken rule in the vitamin industry: major plants regularly overhaul equipment, reducing supply and causing price fluctuations. Add seasonality in the feed industry (stockpiling around Spring Festival), and prices often swing up and down.

Summary of external factors: the vitamin industry is like a roller coaster—usually stable as a rock, but when something happens, prices fly. For investors, you need to watch long-term demand but also keep an eye on supply-side developments.

Three, a general methodology for quickly understanding an industry.