Core views:

Angel Yeast published its 2024 semi-annual report. The company announced 2024H1 revenue of 7.175 billion yuan, +6.86% year on year; net profit due to mother 0.691 billion yuan, +3.21% year on year; net profit after deducting non-return to mother 0.596 billion yuan, -2.50% year on year. Non-recurrent profit and loss mainly came from government subsidies of 0.096 billion yuan in the first half of the year.

Looking at the second quarter of a single quarter, 2024Q2 revenue was 3.692 billion yuan, +11.31% YoY; net profit to mother was 0.372 billion yuan, +17.26% YoY; after deducting non-net profit 0.301 billion yuan, +7.32% YoY.

Domestic demand improved, and overseas expansion continued. On the revenue side, 2024Q2 domestic/overseas revenue was 2.211/1.454 billion yuan respectively, +6.64%/+19.01% year-on-year. Domestic demand improved month-on-month in Q1, mainly due to small packaging products, etc.; overseas markets continued to expand in the Middle East, Africa, Europe, Asia Pacific and other regions, and continued to grow at a high rate in Q2. By product, 2024Q2 yeast and deep processing/sugar/packaging/other main businesses each earned 26.70/0.19/0.095/0.71 billion yuan, compared to +12.24%/-40.07%/-17.05%/+46.42%. The main business demand recovered, and the sugar and packaging business gradually divested. In terms of the number of dealers, there were 1,7549/5688 domestic/overseas dealers at the end of 2024Q2, a net increase of 270/155 compared to the end of Q1, and channel expansion continued. On the profit side, 2024Q2 deducted non-net interest rate -0.30pct year-on-year to 8.16%. Among them, gross margin was +0.27pct to 23.92% year over year. The positive contribution was mainly due to a decrease in molasses costs, a negative contribution from an increase in shipping costs and depreciation, and a decrease in the average price of domestic products due to competition (2024H1's yeast production was +11.5% year-on-year, faster than the yeast revenue growth rate of 8.9%). The 2024Q2 sales expense ratio was +0.56pct to 5.49% year over year; management/R&D/finance expense ratios were -0.33pct/-0.57pct/+0.63pct, respectively.

Profit forecasting and investment advice. Considering government subsidy contributions, the 2024-2026 revenue is expected to be 15.02/16.595/18.268 billion yuan, up 10.59%/10.08% year on year; net profit to mother is 1.37/1.548/1.747 billion yuan, up 7.87%/12.98%/12.87% year over year, corresponding PE valuation is 19/17/15 times. Referring to comparable company valuations, the company was given a PE valuation of 22 times 2024, corresponding to a reasonable value of 34.70 yuan/share, maintaining the purchase rating.

Risk warning. Raw material price risk; overseas business risk; exchange rate risk; food safety risk.