From January to September 2009, the company achieved operating income of 393 million yuan, down 29.65% from the same period last year; operating profit-13.27 million yuan; net profit belonging to the owner of the parent company-14.71 million yuan, earnings per share-0.04 yuan. From July to September, the company realized operating income of 117 million yuan, down 21.2% from the same period last year, operating profit of 285.4 billion yuan, net profit of 283.3 billion yuan belonging to the owner of the parent company, and earnings per share of 0.09 yuan.

The company's profitability is on the decline. The company is mainly engaged in the production and sales of sugar, machine paper and biochemical products. During the reporting period, the company's operating income decreased significantly, mainly due to: 1) the company's poor control of sugarcane resources, resulting in a substantial decline in sugar cane and paper business revenue this year; 2) affected by the financial crisis, the price of company mechanism paper fell sharply. From the perspective of profitability, the company's profitability continues to decline, gross profit margin fell 3.7 percentage points year-on-year, expense rate increased 6.1 percentage points year-on-year. We believe that the company's profitability will decline when it is unfavorable to the loss of sugarcane control.

Made a profit by selling assets in the third quarter. The company's revenue continued to decline in the third quarter, but its profit showed positive growth, mainly due to the investment income generated by the company's disposal of its equity stake in Zhanjiang Ganhua Sugar Co., Ltd. In the early stage, Jiangmen SASAC tried to restructure the company's assets through asset exchange, but failed to do so. We believe that, as the only listed company controlled by Jiangmen SASAC, the restructuring of the company will receive its great support.

Sugar prices still have room to rise next year, but it is hard for companies to benefit. At present, the spot price of sugar is about 4000 yuan. We believe that in terms of supply and demand in the future, there is still room for sugar prices to rise. On the supply side, as of the end of September, the industrial inventory of white sugar is less than 400000 tons, and it needs to supply white sugar consumption for nearly a month. Although the white sugar in the hands of dealers is relatively abundant at present, we still feel that the supply of white sugar this month is relatively tight. Later, if sugar extraction is delayed, sugar prices may re-enter the rising channel. Judging from the situation next year, we believe that the decline in planting area may make the white sugar production continue to decline next year, in the absence of inventory conditions, sugar supply will be more tight. But at the corporate level, it is difficult for companies to benefit from the rise in sugar prices.

Earnings forecasts and ratings. We maintain the company's EPS of-0.10 yuan and-0.26 yuan in 2009-10, giving the company a "reduced" investment rating.

Risk tips: 1) delisting risk; 2) market risk.