Introduction: Export growth led to month-on-month growth, and the Zhoushan project opened up room for growth event: the company announced 2023Q1 revenue of 650 million yuan, up 60.42% year on year, up 6.33% month on month; Guimu's net profit was 90 million yuan, up 79.03% year on year and 39.25% month on month.

Comment: Export growth is the main reason for the increase in performance. Overseas demand for xylitol is strong, and sales amounts have increased month-on-month. 2023Q1 crystalline sugar alcohol products/liquid sugar, alcohol and other products achieved revenue of 501/145 million yuan, up 63.82%/45.18% year on year, and 4.60%/27.68% month on month. Domestic/overseas sales amounted to 253/392 million yuan, a year-on-year increase of 36.12%/78.83%, and a year-on-month change of -11.77%/+28.58%. On the export side, overseas demand for the company's core product, xylitol, is strong and prices remain high. According to the General Administration of Customs, the export volume of 2023Q1 xylitol in Zhejiang Province was 8085.08 tons, a decrease of 5.80% over the previous year, an increase of 26.88% over the previous year; the average export price including tax was 25,600 yuan/ton, an increase of 16.46% over the previous year, and a decrease of 3.53% over the previous year, which is at the historical level of 75.30% in the past 15 years. The export value was 183 million yuan, up 9.71% year on year and 22.40% month on month. Strong demand for xylitol exports from overseas is expected to be due to the European energy crisis brought about by the Russian-Ukrainian conflict last year, which affected the production of xylitol manufacturers overseas. Since xylitol is a mature sweetener, market demand is relatively stable, and downstream suppliers will not be easily changed. The company seized the opportunity to enter the vacant market, expand customers and enhance customer stickiness with a rich product portfolio and technical advantages, leading to a continuous increase in xylitol product sales.

The Zhoushan project's corn raw material guarantee combined transportation advantages bring cost advantages, and the company is expected to grow from leading sugar alcohol to leading food additives. The company issued convertible bonds to build a “1 million ton corn deep-processed health food ingredient project” in Zhoushan, which has now been accepted by the Shanghai Stock Exchange. In the future, production lines for new products such as maltose syrup, glucose syrup, mannitol, polydextrose, modified food starch, resistant dextrin, and alloxaccharide will be built in stages. This move will meet the diverse product needs of customers, enhance customer stickiness, and expand more customers. The construction site of the project is located in Zhoushan International Grain and Oil Industrial Park in Zhejiang Province. There are already various grain and oil processing, warehousing and logistics trading enterprises in the park, such as “China Grain Storage” and “Provincial Grain Depot”, which will guarantee a stable supply of major raw materials such as corn needed by the company. At the same time, with Zhoushan's excellent location, it will effectively reduce product transportation costs and increase customer coverage. Since the production of the project requires a large amount of steam, the company purchased Huahe Thermal Power to guarantee the implementation of the project. At present, the progress of the project is nearing completion. The excellent geographical location and perfect planning will enable the Zhoushan project to fully enhance the company's overall competitiveness after it is put into operation, and help the company grow into a leading food additive.

Investment advice: Optimistic about the company's position as a leading xylitol company. In the future, it will use its technical advantages to expand the layout of new products, enrich the variety of products to create a diversified product portfolio, and eventually become a leading comprehensive food additive enterprise. Net profit attributable to the mother in 2023-2025 is estimated to be 364/483/567 million yuan. The current stock price corresponding to PE is 17.95/13.55/11.53 respectively. It was covered for the first time and gave a “highly recommended” rating.

Risk warning: convertible bond issuance failed, Zhoushan project construction fell short of expectations, product prices fell sharply, overseas demand fell sharply, and acquisition projects fell short of expectations.