Zhongtong Finance and Economics APP learned that CICC released a research report stating that it maintains a 'outperform the industry' rating for fufeng group (00546). Due to the downward trend in prices of products such as monosodium glutamate, xanthan gum, and the sharp decline in gross profit of by-products such as fertilizers, the profit forecast for 2024/25 is revised down by 29%/27% to 2.13/2.27 billion yuan. Despite the profit forecast cut, considering the valuation increase of high dividend target, the target price is lowered by 9% to HK$5.3. The group announced its 1H24 performance: revenue of 13.37 billion yuan, a year-on-year decrease of -1.6%; net income attributable to shareholders of 1.04 billion yuan, corresponding to earnings per share of 0.41 yuan, a year-on-year decrease of -32.3%, meeting market expectations and approaching the upper limit of the profit forecast range.

The report states that monosodium glutamate prices are under pressure, xanthan gum prices have rebounded, and amino acids remain robust. 1) Monosodium Glutamate: downstream demand is relatively stable, but the addition of new production capacity on the supply side combined with the decline in corn prices has led to a downward pressure on monosodium glutamate prices. According to Zhuochuang Information, the current market price of monosodium glutamate is 7,490 yuan/ton, a decrease of 1,660 yuan/ton compared to the average price in 2023. 2) Xanthan Gum: According to Zhuochuang Information, the current xanthan gum price is 0.0295 million yuan/ton, an increase of 0.0045 million yuan/ton from the low point at the beginning of the year. Looking forward to 2H24, the Bank expects downstream industries to resume normal procurement pace after price stabilization, which is expected to drive xanthan gum gross margin to maintain the current reasonable level. 3) Amino Acids: According to Boya Hexun, the current market prices for lysine/threonine amino acids are 10,700/10,900 yuan/ton. The Bank believes that with the decrease in prices of raw materials such as corn, the profitability of threonine/lysine amino acids is relatively robust. After the demand enters the peak season in September and October, the industry's prosperity is expected to continue to rise.