The company is the leader of domestic natural spices, in line with the development trend of the rapid promotion of natural spices, continue to expand production capacity, upgrade product structure, and constantly consolidate the market leading position and open up the growth space by virtue of the advantages of production research and development and deep brand barriers. At the same time, the company actively layout synthetic biotechnology, using enzymes and fermentation processes to transform and upgrade the existing product line, profitability is expected to continue to optimize. We forecast that the return net profit of the company from 2023 to 2025 will be RMB 248 million respectively, with a target price of RMB 45 (corresponding to 20xPE in 2024). Cover for the first time, giving a "buy" rating.

China's natural spice leader, the net profit of returning home from 2016 to 2022 is about 27% CAGR. The company is mainly engaged in the business of natural spices, synthetic spices and coolants, with an annual output of about 3000 tons, focusing on the industry for more than 20 years to become a leading and international supplier of natural spices. As the leader of local natural spices, the company has a strong growth attribute, and its performance continues to grow rapidly.

Steady growth to resist the cycle, natural spices have a broad prospect. Flavors and fragrances are mainly used in the field of required consumption. According to Grand View Research data, the proportion of food, beverage and daily chemical industry in the downstream market is as high as 88%. The global market scale of flavors and fragrances is about 4% CAGR from 2016 to 2022, and the anti-cyclical property is prominent. In recent years, with the concepts of food safety, green environmental protection and non-pollution gradually taking root in the hearts of the people, with the help of the promotion of superimposed policies, there are broad prospects for the growth of natural spices, and the company is expected to fully benefit as the leader of domestic natural spices.

Under construction in Thailand, the project "re-create a fragrance", synthetic biology to help reduce costs and increase profits. Driven by both capacity expansion and process innovation, the company's future performance is expected to rise in both quantity and profit: in terms of capacity expansion, the company continues to expand its spice production capacity through acquisition and self-construction, and the actual self-production capacity at the end of 2021 is more than three times that of 2018. After the overseas project to be invested in Thailand is expected to reach production smoothly, it is expected to "re-create a fragrance". In terms of process innovation, the company's natural flavor preparation is expected to usher in a new chapter of synthetic biology, the product gross profit margin material will be effectively optimized after the successful industrialization of related technology, and the company is expected to achieve further expansion of market share through cost advantage.

Risk factors: large fluctuations in raw material prices; environmental protection issues and production safety accidents; international trade frictions; exchange rate fluctuations; Thailand project construction schedule is not as expected; domestic capacity release is not expected; new technology and new product development risk; industry competition intensifies; product classification standards change.

Profit forecast, valuation and rating: we estimate that the company's homing net profit in 2023-2025 will be 1.20 billion yuan, respectively, and the corresponding EPS forecast will be 1.48 yuan 2.19 yuan, respectively, and the corresponding CAGR will be 44% from 2023 to 2025, while comparable companies' Wind unanimously expects that the average CAGR of 2023-2025 net profit will be 26%. Considering the company's leading position in the field of natural spices and Thailand projects, synthetic biotechnology is expected to maintain high growth after landing, comprehensive PE and EV/EBITDA valuation method, give the company a certain valuation premium, give the company 2024 20xPE (15x EV/EBITDA), give the company a target price of 45 yuan, corresponding to the target market value of 3.6 billion yuan. Cover for the first time, giving a "buy" rating.