Key points of investment

The company's 24H1 performance has maintained rapid growth, and the performance is in line with market expectations. At the same time, benefiting from the decline in raw material costs and the company's efficiency improvement measures, the company's profitability continued to increase. Furthermore, the company continues to explore in the field of synthetic biology, and has now seen initial results, building a long-term competitive advantage.

The company's performance has maintained rapid growth and is in line with market expectations

2024H1 achieved revenue of 0.725 billion yuan, +41.65% YoY; realized net profit of 0.065 billion yuan, +79.28% YoY; 2024Q2 achieved revenue of 0.384 billion yuan, +48.06% YoY; realized net profit of 0.038 billion yuan, or +134.35% YoY; performance in line with market expectations.

The plant extraction business is an important engine of growth. Among them, natural sweeteners maintained rapid growth. The company's 2024H1 plant extraction business achieved revenue of 0.708 billion yuan, an increase of 42.15% over the previous year. Among them, the natural sweeteners business achieved revenue of 0.369 billion yuan, up 23.61% year on year, accounting for 52% of the plant extract business; tea extract achieved revenue of 0.089 billion yuan, up 9.23% year on year, accounting for 13%; and other extracts achieved revenue of 0.25 billion yuan, up 112% year on year, accounting for 35%.

By region, the company's foreign business achieved revenue of 0.439 billion yuan, an increase of 23.96% year on year; domestic business achieved 0.286 billion yuan, an increase of 81.34% year on year, and domestic customers grew rapidly.

Gross margin increased significantly, and net profit margin continued to rise

The company's 2024H1 gross margin was 28.60%, +4.24pct year on year; 2024Q2 gross margin was 30.86%, +5.55pct year on year. The increase in gross margin was mainly due to the restoration of the gross margin of natural sweeteners due to falling raw material prices. 2024H1's sales/management/R&D/finance expenses ratio was 3.86%/8.65%/4.75%/1.66%, respectively, -0.84/-2.80/+0.34/+0.58pct, respectively; 2024Q2 company's sales/management/R&D/finance expense ratios were 4.21%/11.20%/6.45%/2.24%, respectively, year-on-year, -0.99/-3.39/+2.25/+ 1.67pct

2024H1 net profit margin 9.37%, YoY +0.89pct; 2024Q2 net profit margin 10.44%, YoY +2.46pct.

Focus on synthetic biotechnology innovation to enhance long-term competitiveness

In the field of synthetic biology, the company has successfully obtained 8 patents, including 7 in the RM series. Currently, some products in the company's Stevia RM series are ready for commercial implementation, and this product can better meet the company's health needs for high-intensity sweetener products. At present, the company's newly built synthetic biology workshop has entered the commissioning stage and is expected to be officially put into operation in September, laying a good production capacity foundation for the industrialization of the company's R&D achievements in the field of synthetic biology, and building long-term competitiveness for the company.

Maintain the previous profit forecast and maintain the buying rating

We maintain our previous profit forecast. We expect revenue for 2024-2026 to be 1.756 billion yuan, 2.08 billion yuan, and 2.47 billion yuan, respectively, up 17.6%, 18.4%, and 18.8% year-on-year; realized net profit to mother is 0.18, 0.256, and 0.345 billion yuan, respectively, with year-on-year increases of 117.8%, 42.3%, and 34.8%, respectively. The estimated EPS is 0.24, 0.34, and 0.46 yuan, respectively, and the corresponding PE is 27.83, 19.56, and 14.51 times, respectively.

Risk warning: customer development falls short of expectations, fluctuating raw material prices, industry food safety issues, etc.