Main points of investment:

The company focuses on differentiated, small varieties of natural spices. Through the layout of the Thai base, the North American market is expected to return, and the dominant product vanillin will also be back on track. The company's layout of synthetic biology has shown the competitiveness and growth of the company in some products.

The company is the leader of domestic natural spices.

Deeply ploughing the natural spice industry for 20 years, the company has formed three main business sectors: natural spices, synthetic spices and coolants. The company continues to carry out technical iterations and product expansion, and has become a leader in the domestic middle and high-end flavor industry. The company mainly has three major bases in China: Fuzhou, Nantong and Wuxu. after the layout of the Thai base, it is expected that the North American market and the company's core product vanillin is expected to return strongly.

Electronic cigarette industry promotes the rapid growth of demand for coolants

In 2022, the global market size of flavors and fragrances is close to 31.2 billion US dollars, while that of China is about 56 billion yuan, and it is expected to reach 92.1 billion yuan in 2027, which is faster than that of the whole world. In recent years, the e-cigarette industry has put forward new requirements for the flavor and flavor industry, and the company's products such as coolants and leaf alcohols have significantly benefited from this trend. According to our estimates, the domestic demand for flavors and coolers for e-cigarettes is expected to reach 8 billion yuan and 1.2 billion yuan.

Synthetic biology is expected to further consolidate the company's barriers.

The company uses synthetic biology to empower the manufacture of natural spices, has achieved certain results in individual products, and has the possibility of technology spillover. The cost of related products is expected to be greatly reduced and the market is expected to expand rapidly.

Earnings forecast, valuation and rating

We estimate that the company's revenue in 2023-25 will be 7.3 million yuan, 9.9 billion yuan, 1.15 billion yuan, corresponding growth rate of 4%, 35 percent, 16 percent, net profit of 1.3 million yuan, 270 million yuan,-1 percent, 53 percent, 37 percent, 37 percent, 1.61 percent, 2473.39 yuan and 28%, respectively. In view of the company's obvious advantages in the field of natural fragrances, synthetic biology empowered spices are expected to break through. with reference to the comparable company valuation, we give the company 20 times PE in 2024, corresponding to the target price of 49.3 yuan in 2024, with a "buy" rating for the first time.

Risk hint: Thailand base construction progress is not as expected risk, market development is not as expected risk, e-cigarette regulatory risk, main income comes from overseas risk, synthetic biology technology development is not as expected risk, industry space measurement deviation risk