Event: the company released its three-quarter report of 2023, with operating income of 23.873 billion yuan in the first three quarters of 2023, an increase of 22.76% over the same period last year, and net profit of 1.441 billion yuan, an increase of 89.46% over the same period last year. Of these, the company's operating income in the third quarter was 11.147 billion yuan, an increase of 49.36 percent over the same period last year, an increase of 40.56 percent over the previous year, and a net profit of 672 million yuan, an increase of 425.85 percent and 35.88 percent over the same period last year.

Comments:

The continued high price of sugar has contributed to a big increase in performance: the sugar business is the core of the company, accounting for more than 90% of the operating income. In terms of self-produced sugar, the average price of Zheng sugar reached 6570 yuan / ton in the first three quarters of 2023, of which the average price of Q3 reached 6865.5 yuan / ton in a single quarter, an increase of 19.5% over the 22-year average price, leading to a rapid rise in domestic sugar product prices. With the continuation of high sugar prices, the company has fully benefited as a leader in the domestic sugar industry. In terms of production capacity, as of June this year, the company has operated 13 sugar enterprises in China, with an annual output of 700000 tons of sugar, of which there are 5 sugar factories in the sugar cane field and 8 sugar factories in the beet sugar field. In the field of sugar refining, the company has more than 2 million tons of sugar refining capacity per year, ranking first in the domestic industry. in the long run, the sugar refining business can effectively extend the company's sugar industry chain and help the company surpass the cycle and achieve long-term growth. With the continuous improvement of the company's lean management ability, raw material planting technology ability and sugar source control ability, the profitability will continue to improve in the future.

Actively research and develop innovative products, brand marketing promotes tomato business growth: based on sugar, the company constantly explores innovative products, focuses on high-end baking, blending and functional sugar, and iteratively upgrades C-end products.

At the same time, the company is also actively layout tomato processing business, creating beverages, diced tomato, pizza sauce, spaghetti sauce and other "fist" products. The company spent 55 million yuan on R & D in the first three quarters of 2023, of which R & D expenditure increased significantly in the third quarter, up 20.3% from the same period last year. The company attaches great importance to brand marketing, explores innovative products, forms new product development methods such as "five-step method" and "Qidaomen", plays a combination of new media, strengthens customers' minds and other brand promotion methods, and opens up the new marketing mode of "solution team" with the combination of production, marketing and research. The company is unswervingly promoting brand building, and the market recognition is still improving.

The first time to cover the "buy" rating: at present, domestic and international sugar prices are at a high level in the cycle, and the company, as one of the largest sugar producers and traders in China, is expected to fully benefit and contribute to rising performance. We are optimistic about the development prospect of the company. It is estimated that the homing net profit of the company from 2023 to 2025 will be 1.652 billion yuan respectively, corresponding to EPS 0.73 won 0.63 PE. Based on the industry average of 16 times in 2024, the company will be given a "buy" rating for the first time, with a target price of 10.08 yuan.

Risk hints: exchange rate change risk, sugar import policy change risk, tomato market expansion bottleneck.