The company released three quarterly reports for 2023, and the results were in line with expectations. During the reporting period, the company achieved revenue of 2.042 billion yuan (YoY+29%), net profit of 275 million yuan (YoY+8%) and non-return net profit of 273 million yuan (YoY+19%). The performance met expectations. Among them, 23Q3 achieved a revenue of 673 million yuan (YoY+5%,QoQ-6%) in a single quarter, a net profit of 90 million yuan (YoY-21%,QoQ-6%) and a non-return net profit of 81 million yuan (YoY-25%,QoQ-22%). The performance was in line with expectations. 23Q3's sales gross profit margin is 25.31%. The same and month-on-month changes are + 0.56pct and + 1.29pct respectively, and the net profit rate is 13.36%. The same and month-on-month changes are-4.29pct and + 0.10pct, respectively. In terms of expenses, sales and management expenses remained stable, and financial expenses increased by 19.17 million yuan to 6.56 million yuan month-on-month due to exchange rate changes. At the same time, the company attached importance to R & D investment, with R & D expenditure of 36.05 million yuan (YoY+110%,QoQ-10%) in a single quarter.

Overseas shipments of crystal xylitol Q3 decreased, but the trend of export substitution remained unchanged, the demand for liquids and other products remained strong, and the company's performance remained stable. According to the company's disclosed operating data, 23Q3 achieved revenue of 420 million yuan (QoQ-16%) from crystal sugar alcohol products and 245 million yuan (QoQ+14%) from liquid sugar, alcohol and other products in a single quarter; from a regional point of view, 23Q3's domestic income was 394 million yuan (YoY-3%) and overseas income was 261 million yuan (YoY-18%). Crystal sugar alcohol revenue declined significantly in the third quarter, mainly due to a decline in overseas xylitol shipments, especially the impact of Q3 digestion inventory in Russia and other regions, which also led to a significant decline in the company's overseas revenue. In the follow-up, the new market share brought about by the high overseas energy costs in 2022 is expected to continue, and the export substitution of products will remain unchanged for a long time. Liquid sugar, alcohols and other products in Q2 high growth situation, Q3 still significantly improved, we believe that the main reasons: 1) liquid products is Q2-3 is the peak sales season; 2) Huahe thermal power this year compared with the month-on-month continued to increase.

Xylose technical renovation project to improve the raw materials of xylitol, plus Zhoushan project to open up the future growth space. 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" started construction in May 2022 and has now entered the stage of trial production. it is expected that 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. On October 24, 2023, the company announced that it planned to invest no more than 99.6 million yuan in the new "annual processing 100000 tons of corn germ oil extraction project" and 148 million yuan in the new "100000 tons maltodextrin project". These two projects are an extension of the original planned project of Zhoushan Phase I. it is estimated that the construction period of the two projects will be 13 months, and the annual revenue (excluding tax) will be 1.43 yuan and 444 million yuan respectively. The annual profit will increase by 2353 yuan to 37.54 million yuan.

Launch the equity incentive plan to stimulate the vitality of the company and promote the medium-and long-term development. On September 27, 2023, the company issued a 2023 restricted stock incentive plan (draft), which plans to grant 6.8 million restricted shares, accounting for 2.98% of the total share capital of the company at the time of the announcement of this incentive plan, of which 6.3 million shares are granted for the first time and 500000 shares are reserved for the first time. The grant price of the restricted stock for the first time is 12.58 yuan per share, and the reserved grant price is the same as the first grant price. A total of 117 people will be granted the incentive plan for the first time. The restricted stock will be granted for a period of 12 months, 24 months and 36 months respectively from the date of registration of the restricted stocks. The assessment year for lifting the restriction is three fiscal years from 2023 to 2025. The performance evaluation index of each year is operating income, and the target values for the three years are 26.4,31.7 and 4.12 billion yuan respectively. The trigger values were 25.7,30.1 and 3.78 billion yuan respectively. It is estimated that the total amortization cost of the first grant of restricted stock is 76.293 million yuan, and the amortization from 2023 to 2026 is 741.74 yuan, 4068.96 yuan, 1970.90 yuan and 8.477 million yuan respectively. The launch of the equity incentive plan will help to deeply tap the potential of the company, stimulate the vitality of the company in all directions, and make all parties pay attention to the long-term development of the company.

Investment analysis opinion: maintain the company's 2023-2025 homing net profit forecast of 3.92,5.08 and 632 million yuan (excluding the amortization of equity incentive expenses), the current market value corresponds to PE of 14,11,9X 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.