The company's Q2 revenue/profit/net profit was +11.3%/+17.7%/+7.3% year-on-year. The main revenue side Q2 yeast business increased by 12.2%, and sales improved markedly from month to month. Among them, the domestic yeast market resumed positive growth in Q2, the main domestic yeast industry benefited from price promotion strategies and orders resumed, and overseas growth was still strong. Looking ahead to the second half of the year, revenue is expected to maintain double-digit growth under the H2 low base, growth in the derivatives sector will resume, and overseas YE demand will be strong. On the profit side, molasses prices and hydrolyzed sugar prices fell slightly year-on-year this year, and are expected to enjoy cost dividends. The rise in shipping costs slightly suppressed profits, the commissioning of new overseas production capacity was delayed until the end of the year, and the release of new production capacity is expected to drive profit margins to recover further. Looking at the optimization of the yeast industry pattern in the medium to long term, the derivatives business and competitiveness in overseas markets will gradually increase. I am optimistic that the company is in the recovery phase of industry demand and long-term competitiveness optimization. We adjusted the 24-25 EPS to 1.59 yuan and 1.76 yuan, corresponding to 19xPE in '24, maintaining the “gain” rating.

24Q2 revenue increased 11.3%, and net profit to mother increased 17.7%. The company disclosed its 2024 semi-annual report. 24Q2 achieved operating income of 3.692 billion yuan, +11.31%; net profit to mother of 0.372 billion yuan, +17.65% year over year; net profit after deducting non-return to mother of 0.294 billion yuan, +7.32% year over year. Revenue increased steadily, and profit to mother exceeded expectations due to increased government subsidies. 24Q2 sales revenue was 3.87 billion yuan, up 8.70% year on year, and net operating cash flow increased to 0.57 billion yuan, mainly due to an increase in cash received from sales of products and provision of services in the current period.

Q2 Domestic yeast demand has recovered, and overseas growth is still faster than domestic demand. Looking at individual products, Q2's main yeast business/sugar/packaging/other products achieved revenue of 26.7/0.19/0.1/0.71 billion yuan, with year-on-year growth of +12.2%/-40.1%/-17.1%/+46.4%, respectively. Q2 yeast sales improved markedly from month to month (Q1 main business increased 5.4%), mainly 1) Q2 adopted a price-following strategy. Traditional yeast prices declined, and order share increased, driving the yeast business to recover; 2) Yeast derivatives are selling well, and YE downstream snack food is booming Continuing, businesses such as microbial nutrition and animal nutrition have grown. Q2 The sugar production business continued to be divested, and other products (enzyme preparations, OEM, baking ingredients, etc.) achieved high growth. Overseas markets continued their previous high growth. In Q2, domestic/overseas revenue was 2.21 billion/1.454 billion, up +6.6%/+19.0% year on year respectively. Domestic demand gradually recovered, and overseas market growth was still strong. The European, Middle East, and African markets grew by more than 20% year on year. It is expected that the H2 overseas growth trend will continue.

The decline in structural optimization costs led to an improvement in gross margin, and government subsidies increased net interest rates by +0.5 pct year-on-year.

The 24Q2 company's gross margin was +0.3 pct year-on-year, mainly benefiting from the decline in molasses costs, the increase in the share of high-margin small-packaged yeast, and the decline in the share of low-margin businesses such as sugar production and packaging. The cost rate was basically stable during the period. The 24Q2 sales/management/R&D expense ratio was +0.6 pct, and the financial expense ratio was +0.6 pct year over year, which was an increase in interest expenses, the income tax rate was +4pct to 19.0% year over year, and the increase in non-recurring profit and loss in Q2 was mainly due to an increase in government subsidies (other income increased 0.054 billion yuan). Finally, Q2 achieved a net profit margin of 10.1%, +0.5 pcts year over year, net interest rate of 8.16% year-on-year.

Investment advice: Domestic operations are improving, we expect H2 sales to accelerate, and maintain the “gain” rating.

Q2 The company's revenue/profit ratio was +11.3%/+17.7%, revenue side sales improved month-on-month, and its domestic market resumed positive growth, and overseas growth was still strong. Traditional yeast benefited from price promotion strategies and the return of orders. Looking ahead to the second half of the year, revenue is expected to maintain double-digit growth under the H2 low base, growth in the derivatives sector has resumed, and overseas YE demand is strong. On the profit side, molasses prices and hydrolyzed sugar prices fell slightly year on year this year, and are expected to enjoy cost dividends. The year-on-year increase in shipping costs slightly suppressed profits, the commissioning of new overseas production capacity was delayed until the end of the year, and the release of new production capacity is expected to drive profit margins to recover further. Looking at the optimization of the yeast industry pattern in the medium to long term, the derivatives business and competitiveness in overseas markets will gradually increase. I am optimistic that the company is in the recovery phase of industry demand and long-term competitiveness optimization.

We adjusted the 24-25 EPS to 1.59 yuan and 1.76 yuan, corresponding to 19xPE in 24, maintaining the “gain” rating.

Risk warning: demand recovery falls short of expectations, capacity construction progress falls short of expectations, rising raw material costs, phased intensification of competition, etc.