Key points of investment

Angel Yeast released its 2024 semi-annual report. 2024H1 achieved revenue of 7.175 billion yuan, a year-on-year increase of 6.86%, and achieved net profit to mother of 0.691 billion yuan, or 3.21% year-on-year. In 2024Q2, the company achieved revenue of 3.692 billion yuan, an increase of 11.30% year on year; net profit to mother was 0.372 billion yuan, an increase of 17.26% year on year.

The main business showed resilience, and overseas markets grew rapidly

(1) By product: 2024Q2 yeast and deep-processing, sugar production and packaging products achieved revenue of 2.67/0.19/0.095 billion yuan, compared with 12.24%, -40.07%, and -17.05%, respectively. (2) Channel division: 2024Q2 online and offline channels achieved revenue of 1.195/2.47 billion yuan respectively, an increase of 7.65%/13.04%. (3) By region: The company seized the opportunity to promote a global strategy. 2024Q2's domestic and foreign market revenue was 2.211/1.454 billion yuan respectively, up 6.64%/19.01% year on year; (4) Distributors: 2024H1 The number of domestic and foreign dealers reached 17549/5688 respectively, up 8.07%/11.84% year on year, and overseas markets expanded smoothly.

Improved operating efficiency and increased profitability

Thanks to cost dividends and procurement efficiency, 2024Q2's gross margin was +0.27pct to 23.92% year over year. Due to the increased promotion of core products through online channels, the short-term sales expenses rate is under slight pressure, but the direction of cost reduction and efficiency has not changed: 2024Q2's sales expenses rate and management expenses ratio were 5.49% and 3.13%, respectively, +0.56 and -0.33pct, respectively, and the net margin was +0.36pct to 10.26% year over year.

The economy is recovering, and the operation is steady

The company leverages the advantages of upgrading new strains and continuously enriching its product portfolio. At the same time, the baked pasta business is expected to maintain steady growth; at the same time, it is expected to strengthen the development and maintenance of major industrial customers in the field of microbial nutrition, develop segmented industry promotion for YE Foods, and achieve high growth in the downstream derivatives business. In addition, the company is speeding up the registration of overseas marketing subsidiaries, hiring localized sales personnel, accelerating the expansion of the business layout, anchoring annual targets, and is expected to achieve double-digit revenue growth.

Profit Forecasts, Valuations, and Ratings

Considering that demand recovery is stable overall, we adjusted the company's 2024-2026 revenue to 15.45/17.38/19.434 billion yuan respectively, with year-on-year growth rates of 13.76%/12.49%/11.82%, respectively; net profit to mother in 2024-2026 was 1.371/1.608/1.898 billion yuan, respectively, with year-on-year growth rates of 7.91%/17.29%/18.08%, respectively. EPS was 1.58/1.85/2.19 yuan, respectively, maintaining a “buy” rating.

Risk warning: food safety risk, risk of channel expansion falling short of expectations, risk of rising raw material prices