Event: the company's income in the first three quarters of 2021 was 2.513 billion yuan, up 28.38% over the same period last year; the net profit was 161 million yuan, up 18.05% over the same period last year; and the net profit was 142 million yuan, up 12.13% from the same period last year.

Of this total, 2021Q3 achieved an income of 821 million yuan, an increase of 22.20% over the same period last year, a net profit of 39 million yuan, a decrease of 10.62% over the same period last year, and a net profit of 32 million yuan, a decrease of 20.93% over the same period last year.

Food ingredient Q3 continues to grow strongly, and the share of income continues to rise. In the first three quarters of 2021, the company achieved 1.923 billion yuan in sales of food ingredients, an increase of 39.43 percent over the same period last year, of which 2021Q3 realized revenue of 636 million yuan, up 38.35 percent over the same period last year.

Food ingredients manufacturing business has developed rapidly, accounting for a gradual increase in the main business income since 2021. 21Q3 food ingredients business sales accounted for 77.84%, an increase of 8.78pct over the same period last year; food ingredients trade business based on the steady recovery of domestic consumer confidence, a significant increase over the same period last year.

Under the high base of Q3, the growth of flavors and fragrances slows down, and the rising cost puts pressure on gross profit margin. In the first three quarters of 2021, the company's flavor revenue was 407 million yuan, an increase of 4.09% over the same period last year; of which 2021Q3 revenue was 130 million yuan, down 9.97% from the same period last year, mainly due to the weak demand for Q1 under the epidemic last year, and the outbreak of demand for Q2 led to a high base. Flavor business is expected to be affected by the overseas epidemic continues to lead to a significant rise in the price of some raw materials and a decline in gross profit margin. In the first three quarters of 2021, the company's spice revenue was 171 million yuan, up 1.08% from the same period last year; of which 2021Q3 revenue was 51 million yuan, down 16.98% from the same period last year, mainly due to the new production capacity of spices in the second half of last year. The spice business is expected to see a decline in gross profit margins due to the appreciation of the renminbi and rising prices of raw materials.

The comprehensive gross profit margin decreased and the expense rate increased slightly. 2021Q3's gross profit margin was 14.35%, down 4.64 pct from a year earlier. The gross sales difference of 2021Q3 was 11.34%, down 2.87 pct from the same period last year, mainly due to the rising cost of raw materials.

The sales expense rate and management expense rate of 2021Q3 Company are-1.77, + 0.18 pct to 3.01% and 4.40% respectively compared with the same period last year. After restoring the impact of freight, the sales expense rate is expected to increase slightly from the same period last year, which is expected to be mainly due to the increase in personnel. Due to the growth in revenue and profitability of the food ingredients business, the profit and loss of minority shareholders of 2021Q3 rose to 7 million yuan from 0.05 in the same period last year. Taken together, 21Q3's homing net profit margin fell 1.74pct to 4.73 per cent year-on-year.

Profit forecast: food ingredients are in a vertically enhanced consumption environment, and the company has initially formed a pattern of "led by flavors and spices and integrated development of food ingredients". According to the company's three quarterly reports, taking into account the pressure on profits caused by the rise in raw material prices, we adjust our profit forecasts and estimate that the company's 2021-2023 revenue will be 33.84,38.51 and 4.764 billion yuan respectively, the net profit will be 2.05,2.22 and 306 million yuan (the previous forecast is 2.56,2.83 and 379 million yuan), and the EPS will be 0.64,0.70,0.96 yuan respectively (not taking into account the fixed dilution increase). Maintain a "buy" rating.

Risk reminder events: the risk of repeated global epidemics; the risk of market competition; the risk of food safety; the risk of fluctuations in raw material prices; and the risk of lower-than-expected production capacity of new projects.