Main points of investment:

The company released 2023 mid-year report: during the reporting period, the company achieved revenue of 1.369 billion yuan (YoY+44%), net profit of 185 million yuan (YoY+30%) and non-return net profit of 192 million yuan (YoY+58%). The performance met expectations. Among them, 23Q2 achieved a revenue of 718 million yuan (YoY+32%,QoQ+10%) in a single quarter, a net profit of 95 million yuan (YoY+4%,QoQ+6%) and a non-return net profit of 104 million yuan (YoY+28%,QoQ+19%). The performance was in line with expectations. 23Q2's sales gross profit margin is 24.02%. The same and month-on-month changes are + 1.83pct and + 0.8pct respectively, and the net profit rate is 13.26%. The same and month-on-month changes are-3.57pct and-0.58pct, respectively. Cost invention, sales and management expenses remain stable, financial expense income exchange rate fluctuation dropped to-13 million yuan, while the company continued to increase R & D investment, R & D expenditure reached 40 million yuan (YoY+26%,QoQ+112%) in a single quarter. In addition, 23Q2 fair value changes and investment income loss of 8.55 million yuan, credit impairment loss of 1.38 million yuan, causing a certain drag on performance.

Product demand continues to be strong, Q2 performance steady growth. In terms of products, 23H1's revenue from crystal sugar alcohol products is 998 million yuan (YoY+39%), and that of liquid sugar, alcohols and other products is 360 million yuan (YoY+61%). From a regional point of view, 23H1's domestic income is 658 million yuan (YoY+48%) and overseas income is 711 million yuan (YoY+41%).

Quarter-on-quarter comparison, 23Q2 single quarter, crystal sugar alcohol products revenue of 498 million yuan (QoQ-1%), liquid sugar, alcohol and other products revenue of 215 million yuan (QoQ+48%); domestic income of 405 million yuan (QoQ+60%), overseas income of 318 million yuan (QoQ-19%). Liquid sugars, alcohols and other products have a large quarter-on-quarter increase. On the one hand, Q2 liquid products are the peak season for domestic sales, on the other hand, the income of Q2 is much higher than that of Q1 after the balance sheet of Huahe Thermal Power this year.

Excluding the impact of China and thermoelectricity, domestic income increased significantly month-on-month. We believe that on the one hand, Q2 is the peak sales season for liquid products, on the other hand, it mainly comes from the sustained and rapid growth of demand for sorbitol.

The xylose technical renovation project improves the matching of xylitol raw materials, and the Zhoushan project opens the space for future growth. The matching of raw material xylose determines the profitability of xylitol to a large extent. The company's "annual output of 30,000 tons of D-xylose green intelligent promotion and transformation project"

Construction started in May 2022, and infrastructure construction and equipment installation have been completed. after the subsequent formal production, the competitive advantage of the company's xylitol products will be further strengthened. Considering the long-term development of the company, the company chose the site of Zhejiang Zhoushan International Grain and Oil Industrial Park to plan and build the second production base, laying out the "2 million tons corn intensive processing health food ingredient project". The first phase of the project, "1 million tons of corn intensive processing health food ingredients project", was launched in August 2022 and is currently under construction. The first phase of the project is divided into two stages, the first phase of the construction period of 2 years, mainly liquid syrup and some crystal sugar alcohol products; the second phase of the construction period of 3 years, dietary fiber, modified starch and other new product lines will be put into construction one after another.

Zhoushan project vertically improves the upstream supply chain layout, ensures the supply of starch, the main raw materials, horizontal development continues to enrich the product structure, to meet the diversified needs of customers, will open up the company's long-term growth space.

Investment analysis opinion: maintain the company's home net profit forecast of 3.92,5.08 and 632 million yuan from 2023 to 2025, and the current market value corresponds to PE of 15,12,9X respectively, maintaining the "overweight" rating.

Risk tips: 1) a sharp rise in the price of raw materials; 2) sharp fluctuations in product prices; 3) the promotion of new projects is not as expected.