Main points of investment

Event: the company released its results for the third quarter of 2023, achieving operating income of 470 million yuan, year-on-year-12%; net profit of 70 million yuan,-30%; and deducting non-net profit of 60 million yuan,-31% of the same period last year. Among them, 23Q3 realized operating income of 190 million yuan, year-on-year + 10%, month-on-month + 15%, net profit of 23 million yuan, year-on-year-27%, month-on-month-12%, and deducted non-net profit of 25 million yuan, + 5% and + 15%.

There are broad prospects for the development of the downstream food and daily chemical industry: in the short term, the recovery of the downstream food sector in 2023 is good. China's urban per capita disposable income and per capita food, tobacco and alcohol consumption expenditure in 2023Q3 increased by 6% and 8% compared with the same period last year. In the long run, the Flavor and Fragrance Industry's 14th five-year Plan predicts that China's flavor output will reach 400000 tons in 2025, and spice production will reach 250000 tons, with CAGR of 3% and 2% respectively in 5 years.

Customer stability + technical advantages, coolant, vanillin in the international market has a high share: the company with product quality, technical advantages, through Mars Wrigley strict approval procedures, after more than a year of audit cycle, with Mars Wrigley to establish a stable relationship of cooperation.

The continuous promotion of the Thai subsidiary project will help to alleviate the high tariff pressure and improve the profit margin: the establishment of the Thai subsidiary will help alleviate the high tariff pressure, optimize the overseas business layout, increase the company's production capacity and expand its performance.

Profit forecast and investment rating: based on the sales of the company's products and the progress of the project in Thailand, we adjusted the company's net profit for 2023-2025 to 0.96,1.5 and 210 million yuan respectively (previously expected to be 1.1,1.7 and 240 million yuan for 2023-2025), with year-on-year growth rates of-27%, 60% and 38% respectively. The PE corresponding to the closing price on October 24, 2023 was 27, 17 and 12 times respectively. Taking into account the company's stable relationship with customers, strong research and development capabilities, leading advantages of coolants and vanillin in segments, and benefiting from the policy support of natural spices and the construction of a base in Thailand, we are optimistic about the company's development prospects. maintain a "Buy" rating.

Risk tips: macroeconomic fluctuation risk; raw material price fluctuation risk; market competition intensification and demand change risk; less than expected risk of projects under construction; environmental protection risk; customer concentration risk.