Incident: The company released its quarterly report on April 9, achieving revenue of 6.487 billion yuan, -6.67%, and -10.34% month-on-month; net profit to mother of 752 million yuan, -6.13% year-on-year and -26.33% month-on-month.

The drop in prices dragged down revenue slightly, and overseas business increased year-on-year. On the revenue side, 2401's revenue decline was mainly due to a decline in the average prices of monosodium glutamate, xanthan gum, and large raw by-products. By product, 2401 flavors/feed amino acids/pharmaceutical amino acids/large raw material by-products/others (xanthan gum, trehalose) achieved revenue of 20.46/27.55/1.33/9.55/ 598 million yuan, respectively, -10.2%/+17.6%/-16.3%/-29.8%/-26.3%. In terms of sales, sales of threonine, xanthan gum, and large raw materials and by-products showed an increase; by region, 2401 domestic/foreign revenue of 40.07/2,479 billion yuan, year-on-year-

18.0%/+20.0%; on the profit side, the company's gross margin in 2401 was 19.33%, -0.51 pcts year on year, down 3.84 pcts month over month. The decline in gross margin was mainly due to a drop in the average price of xanthan gum and large raw materials and by-products.

2401 Prices in the industry are under pressure, and inventories are at a lower level. According to Baichuan Yingfu, the average market price for 2401 threonine/lysine/monosodium glutamate/corn protein/corn was 10.43/9.57/8182.96/4205.33/2373.35 (yuan/ton), -15.06%/-7.89%/-9.71%/-15.72%/-9.83%. In terms of inventory, as of April 5, the threonine/lysine/monosodium glutamate factory inventory was 6,300/10300/94670 tons, respectively, at 37.4%, 23.9%, and 38.2% levels in the past three years. The supply and demand pattern of the company's main products is in a favorable position in the industrial chain, thus ensuring that the company has strong bargaining power, and the company's performance is expected to continue to improve.

The company's net profit for 24/25/26 is estimated to be 32.29/38.30/4.249 billion yuan, maintaining a “buy” rating.

Risk warning:

Project construction falls short of expected risks; market competition increases risks; demand falls short of expected risks.