Ya Xiang shares announced 2023 semi-annual report. In the first half of 2023, the company realized operating income of 287 million yuan, down 22.60% from the same period last year, while the non-net profit deducted from the mother was 38 million yuan, down 43.48% from the same period last year.

Many of the company's products have a leading position in its market segment. Among them, the main products of the company's natural spices are eugenol vanillin and ferulic acid vanillin, that is, vanillin produced by eugenol, ferulic acid and other renewable substances as raw materials, the company has become one of the major manufacturers of this kind of products in the world. The company's coolant products are mainly WS series coolant products such as WS-23, and the domestic suppliers of these products are mainly the company and AIP shares, and the company has become one of the major manufacturers of such products in the world. The main customers of this product are Mars Wrigley, International Flavor and Flavor and other companies.

The company launched a share buyback plan to demonstrate management confidence. The total amount of funds used for the repurchase is not less than 15 million yuan and no more than 30 million yuan. According to the price ceiling of 38 yuan per share, the estimated number of repurchased shares is 394737 to 789473 shares, accounting for 0.49% to 0.98% of the company's total share capital. The shares repurchased by the company are intended to be used for the implementation of the employee stock ownership plan or equity incentive plan, which is conducive to improving the company's long-term incentive mechanism and promoting the company's long-term, sustained and healthy development.

In addition to traditional tobacco, the new type of tobacco with rapid increase in penetration may lead to a surge in tobacco flavor in the future.

According to data from the National Bureau of Statistics, Euromonitor and head Leopard Research Institute, the global market scale of e-cigarettes shows a steady growth trend in terms of atomized e-cigarettes and HNB. The market size of HNB has increased from US $1.4 billion in 2016 to US $28.8 billion in 2021, with a compound growth rate of 83%. The market size of atomized e-cigarettes has increased from US $9.7 billion in 2016 to US $22.8 billion in 2021, with a compound growth rate of 19%. At present, China has increased the proportion of R & D distribution of HNB, it is expected that HNB into the harvest period will further drive the demand for tobacco flavor.

Profit forecast and investment evaluation. We lowered our performance due to the destocking of downstream customers in the first half of the year, which affected capacity utilization. We estimate that the net return profit of Ya Xiang shares from 2023 to 2025 will be 1.12,1.71 and 240 million yuan (previously 1.51,1.98 and 282 million yuan), corresponding to 1.39,2.12 and 2.97 yuan EPS respectively (1.87,2.45,3.48 yuan previously). Taken together, we give Yaxang shares a valuation of 27 times PE in 2023, corresponding to the target price of 37.53 yuan (previously 46.75 yuan, 25 times 2023 PE valuation,-20%), maintaining the "better than the market" investment rating.

Risk hint. Investment in construction capacity is lower than expected; macroeconomic decline; market prices of raw materials fall.