Event: Jiabiyou Announces 2023 Quarterly Report. 23Q1-3, the company realized operating income of 325 million yuan, year-on-year +18.88%; net profit attributable to parent 60.41 million yuan, year-on-year-22.41%; net profit deducted from non-parent 41.05 million yuan, year-on-year-25.26%. Among them, 23Q3 realized operating income of 126 million yuan, year-on-year +23.48%, net profit attributable to parent 25.57 million yuan, year-on-year-8.17%; net profit deducted from non-parent 18.26 million yuan, year-on-year-4.06%.

Comments:

Revenue continued to increase month-on-month, and overseas customer pickups rose month-on-month. In the third quarter alone, the revenue end was +23.48% year-on-year and +13.58% month-on-month. The increase was mainly due to the recovery of orders from overseas customers. Considering the increase in the number of domestic customers due to the new national standard, although the overseas customers were lower than last year due to the approval of the new national standard, the company's revenue still increased.

Gross profit margin decreased slightly year-on-year, net profit continued to increase month-on-month. As the gross profit margin of overseas business is higher than that of domestic business, affected by the decrease of overseas business proportion compared with the same period last year, the average price per ton of domestic products decreased due to the impact of the new national standard, so that the gross profit margin of Q3 reached 41.39%,-2.52pct year-on-year. In terms of expenses, the sales expense ratio, management expense ratio, R & D expense ratio and financial expense ratio of Q3 of the Company were 5.38%, 8.42%, 8.23% and 0.36% respectively, compared with-1.22pct,-2.23pct,-3.19pct and +7.38pct. The overall expense ratio contracted slightly in this quarter. Only the low financial expenses and the increase of net investment income in the same period last year made the operating profit margin of Q3 this year-8.15pct year-on-year. As a result, profit declined slightly year-on-year while revenue increased year-on-year. From the month-on-month perspective, net interest rate and net profit attributable to the mother have shown a month-on-month increase trend since this year.

HMO has become a new food additive, and the company is actively applying. On September 22 this year, the Health Commission officially approved two HMO varieties, 2'-FL and LNNT, produced by synthetic biology as new food additives for infant formula. Although some competitors 'HMO products have been approved, there are currently no downstream baby powder customers who have completed the formula registration related to baby powder. Judging from the progress of Jiabiyou, the company is actively promoting product approval work, and we expect to obtain approval in the first half of next year. The company is currently building capacity simultaneously and will further expand depending on subsequent market conditions.

Earnings forecast and investment rating: reversal continues to advance, pay attention to business progress. Under the background of continuous recovery of overseas orders and stable increment of new national standards, the revenue end of the company has been continuously improved since the beginning of this year. Next, we need to pay attention not only to the situation of the company's downstream major customers in the production capacity conversion of new powder, but also to the progress of overseas negotiations with Mead Johnson, Abbott and other infant powder giants, as well as to the company's HMO approval and capacity preparation. Overall, we believe the company is still at the bottom of its fundamentals and is expected to continue to improve in the future. We expect EPS of 0.57/0.70/0.91 yuan for 2023-2025, corresponding to 32X, 26X and 20XPE for 2023-2025 respectively, maintaining the "buy" rating for the company.

Risk factors: customer orders are lower than expected, product price reduction is higher than expected