Event: The company released its 2024 three-quarter report. In the first three quarters, the company achieved operating income of 3.894 billion yuan, an increase of 27.30% over the previous year, and realized net profit of 0.488 billion yuan to mother, an increase of 74.07% over the previous year. In Q3, the company achieved revenue of 0.494 billion yuan, a year-on-year decrease of 3.50% and a month-on-month decrease of 68.57%; realized net profit to mother -0.065 billion yuan, a year-on-year decrease of 0.007 billion yuan, a year-on-year decrease of 0.162 billion yuan.

The company's revenue and net profit to mother increased year-on-year in the first three quarters of 24 years, and the blueberry business contributed to the increase in performance. The company's blueberry business continued to expand in the first three quarters of 24, and its sales revenue increased 1.115 billion yuan year on year, up 248.41% year on year. However, the consolidated revenue of the company's holding distributors and sales revenue from the pesticide formulation business declined in the first three quarters of 24. The number of holding dealers decreased from 27 in the same period last year to 17, and the total sales revenue decreased by 0.213 billion yuan, a year-on-year decrease of 23.14%; the decline in pesticide sales prices led to a decrease of 0.067 billion yuan in the pesticide formulation business, a decrease of 3.97% year on year. In terms of gross margin, the company's gross sales margin for the first three quarters of 24 was 34.03%, an increase of 4.39pct over the previous year. In terms of cost ratios, the company's sales, management, R&D, and finance expenses for the first three quarters of 24 were 9.1%, 7.7%, 2.8%, and 2.3%, respectively, with year-on-year increases of 0.01, 1.72, 0.14, and 0.16 pct, respectively.

The blueberry business continues to expand, and the supporting structure for the fresh food business continues to be adjusted and optimized. In the fresh consumer business, the company uses blueberries as a strategic crop. The company's total production of blueberries during the 23/24 production season was about 0.025 million tons. Early technology moved the overall market time of blueberries forward. Profits were mainly reflected in Q4 2023 and Q1 2024, while Q2 blueberries were at the end of the production season, and the profit contribution was small. Generally speaking, fruit production is about 1 ton/mu in the first year, 1.3-1.5 tons/mu the following year, and generally stabilizes at around 1.5 tons/mu after the third year. In the 24/25 production season, 0.02 million acres of the company's production area of about 0.03 million acres of blueberries are in the 2-3 year stage. The average yield per mu in the new season is expected to be higher than 1.3 tons. Meanwhile, in the first half of '24, the company adjusted and optimized the supporting structure for the fresh food business, and the full-link model has basically taken shape. In terms of marketing, the company successfully cooperated with channel vendors and KA customers for the first year, and explored a new sales model for Puguo Land Sales. In addition, the company uses team optimization, rotation breaks, enhanced training, and Amoeba data modeling to promote the company's off-season operations.

The production capacity layout has been steadily increased, and multiple product registration certificates have been approved to expand the scope of product use. In terms of production capacity, by the end of '23, the company had production capacity of 2.6, 1.8, 0.025, 0.025, 0.011, 0.0004 million tons/year for pesticides, disinfectants, herbicides, plant nutrition, and additives. The company's pesticide production capacity was 0.0019 million tons/year, which is currently in the trial operation stage. In terms of registration certificates, by the end of '23, the company and its core subsidiaries had a total of 1,467 registration certificates for pesticide products, covering important diseases and pests in major domestic food and cash crops.

Profit forecast, valuation and rating: We maintain the company's 24-26 profit forecast. The company's net profit for 24-26 is estimated to be 0.619/0.77/0.859 billion yuan, respectively. The company is the largest pesticide formulation company in China. It lays out the high-end planting industry to start a second growth curve. It is optimistic about the company's long-term development and maintains the company's “gain” rating.

Risk warning: The risk that production in the planting industry falls short of expectations, pesticide demand falls short of expectations, and the risk of cost fluctuations.