This report is read as follows:
Domestic and international sugar prices are on the high side in the cycle. As one of the largest sugar producers and traders in China, the company is expected to fully benefit and help the performance rise.
Main points of investment:
Maintain "increasing holdings". As the sugar price of 5700 yuan / ton in Guangxi is lower than expected, we adjust the company's 2022-2023EPS to 0.38 yuan (- 0.15) yuan and 0.36 yuan (- 0.22) yuan, and it is estimated that the EPS will be 0.3 in 2024. Give 2023 industries an average of 25 times PE, corresponding to the target price of 9 (- 3.01) yuan, maintain the "overweight" rating.
The performance was lower than expected. The company disclosed its results for the third quarter of 2022. During the reporting period, the company's operating income reached 19.364 billion yuan, an increase of 7.3% over the same period last year. The net profit belonging to shareholders of listed companies was 75.758 billion yuan, an increase of 0.83% over the same period last year.
The maintenance of high sugar prices contributed to the rise in performance. Supply side: the persistent root of sugarcane in China is 3 years, and that of major sugar-producing places such as Brazil and Australia is 5-7 years. 2022 is six years from the peak of the previous cycle, sugar-producing countries will reduce production, and the decline in global sugar supply will push up sugar prices. Demand side: the higher-than-expected rise in oil prices has led to an increase in the demand for sugarcane for fuel ethanol, which in turn has driven global sugar prices to remain relatively high. Affected by the rise in sugar prices, the company has fully benefited as the leader of the domestic sugar industry.
The contribution of sugar business is high, and the company's profit is expected to improve step by step. The company's sugar business contributes more than 90% of its revenue, and with the maintenance of the sugar cycle, the company's profits will gradually increase. In addition, the company's competitive advantage continues to strengthen, with the continuous improvement of the company's lean management ability, raw material planting technology ability, sugar source control ability and other aspects, the core competitiveness continues to enhance, by enhancing its own core competitiveness, the company's costs and expenses are effectively reduced, which will also effectively improve the company's profitability.
Risk hints: exchange rate change risk, sugar industry import policy change risk.