This year's sugar cane production in Guangxi is another good harvest year. The country's sugar production in 07/08 is likely to reach 13.5 million tons (8 million tons in 05/06, 12 million tons in 06/07), while Guangxi's production is estimated to increase 15% — 20% to more than 8.2 million tons in 07/08. The government implemented “two-sided regulation” on the sugar cane market. The purchase price of sugar cane set by the Guangxi government this year is 275 yuan per ton, which is the same as last year. The corresponding sugar price is 3,900 yuan per ton, and more is returned to sugar farmers at 6%. The state can regulate the supply of sucrose at any time. Therefore, the price of sugar in Guangxi will probably run around 3,850 yuan/ton for most of the time. The position of Guitang Co., Ltd. in the Guangxi sugar industry Guitang Co., Ltd. has an annual sugar production capacity of only 130,000 tons, ranking 9th in terms of sugar production scale among the top ten sugar industry groups in Guangxi. Since the total area of sugar cane cultivation in Guigang City, where Guitang Co., Ltd. is located, is only about 200,000 mu, the company will have limited sources of raw materials in the next few years. One of the company's business highlights is that the company mainly produces carbonated sugar, which is superior to the mainstream product sulfide sugar in terms of color, quality, and price. Therefore, there are basically no sales problems with the products of Guitang Co., Ltd. Second, the company uses bagasse as its main raw material. Currently, the paper business already accounts for more than 70% of the company's business revenue, so to be precise, Guitang Co., Ltd. is already a company with two main businesses. One of the two possibilities for the company's future business expansion is that Huaqiang Group, the controlling shareholder, will inject Fengshan Sugar Factory into Guitang's shares, and there will be no major operational problems. The key is whether this injection of completely homogeneous business can significantly increase the profit level of Guidang shares. Second, the company is also exploring the possibility of integrating forest pulp and paper, but if it leaves the comprehensive use of bagasse to expand the papermaking business, it still needs to be fully demonstrated. Profit forecast and investment rating We estimate that the company's profit after tax from 2007 to 2009 was 65 million yuan, 68 million yuan, and 70 million yuan respectively; EPS per share was 0.22 yuan, 0.23 yuan, and 0.24 yuan respectively. Significant changes in the company's performance in the future will mainly depend on either significant changes in sugar prices or major changes in the company, such as asset injection and business restructuring. Based on the company's current operating performance, business scale, and sugar prices, we have given an investment rating of “hold” for the time being.