Incident: The company released its semi-annual report for 2023. In the first half of the year, it achieved operating income of 680 million yuan, a year-on-year decrease of 6.8%, and realized net profit of 17.58 million yuan, a year-on-year decrease of 24%. 2023Q2 achieved operating income of 350 million yuan, down 9.6% year on year, realized net profit of 8.24 million yuan, down 46.4% year on year, and performance fell below market expectations.

The product matrix is rich, and supermarket channels have declined markedly. 1. By category, fresh soy products, vegetable protein drinks, and casual soy products achieved revenue of 450 million yuan (-9.6%), 88.69 million yuan (-1.3%), and 37.74 million yuan (-6.6%), respectively, in the first half of the year. The company has a rich product matrix, with more than 400 SKUs, and the three major soybean product series can achieve production and sales collaboration. 2. By channel, distribution, direct sales, and supermarkets achieved revenue of 400 million yuan (-3.8%), 7.09 million yuan (-1.4%), and 130 million yuan (-25.1%), respectively. The supermarket channel declined significantly, while distribution and direct sales declined slightly.

Profitability is under pressure. 1. The overall gross profit margin for the first half of 2023 was 25.4%, an increase of 0.6pp over the previous year. As the purchase price of soybeans falls steadily, gross margin will gradually improve. 2. In the first half of the year, the sales expense ratio, management cost rate, and R&D expense ratio were 15%, 4.8%, and 0.8% respectively, which remained stable. The financial expense ratio was 1.2%, an increase of 1pp over the previous year, mainly due to increased interest expenses and reduced exchange earnings. The overall net interest rate was 2.3%, down 0.8 pp from the previous year.

Subsidiaries in Beijing, Shanxi and Guizhou were formally established, and national expansion continues to advance. Beijing Zuming, Shanxi Zuming, and Guizhou Zuming were established. The company's shareholding ratios were 50.83%, 51.13%, and 51.00% respectively. The partners were Beijing Xiangxiang, Taiyuan Golden Soy, and Guizhou Fangxin, with investment amounts of 61 million yuan, 68 million yuan, and 5.58 million yuan respectively. It is moving towards a new stage of nationalization. We look forward to entering a new development path after standardized operation of the invested company. While deeply involved in the Jiangsu, Zhejiang, and Shanghai regions, the company will continue to focus on expanding the Yangtze River Delta, Beijing-Tianjin-Hebei, Pearl River Delta, and central China provincial capitals. The medium- to long-term development logic has been further strengthened. Furthermore, the original name is the official soy products supplier for the 2022 Asian Games and Asian Paralympic Games, and its brand strength will be further enhanced.

Profit forecasts and investment recommendations. Net profit for 2023-2025 is estimated to be 53.66 million yuan, 79.13 million yuan, and 100 million yuan respectively; EPS is 0.43 yuan, 0.63 yuan, and 0.81 yuan respectively; corresponding dynamic PE is 48 times, 33 times, and 26 times, respectively. Considering that the company is a leader in the fresh soy products segment and is also in a period of national expansion, it is valued 40 times more than 2024, corresponding to a target price of 25.20 yuan, maintaining a “buy” rating.

Risk warning: The risk of soybean prices continuing to rise; project implementation or falling short of expectations.