Incident: The company released its 2024 three-quarter report. 24Q1-3 achieved total operating income of 10.912 billion yuan, +13.04% year over year; realized net profit of 0.953 billion yuan, +4.23% year over year; realized net profit deducted from non-mother of 0.839 billion yuan, +3.44% year over year. The corresponding Q3 achieved total operating income of 3.738 billion yuan, +27.14% year over year, realized net profit of 0.262 billion yuan, +7.02% year over year; realized net profit without deduction of 0.243 billion yuan, or +21.60% year over year.

The revenue side performed brilliantly, exceeding market expectations. 24Q3 achieved total revenue of 3.738 billion yuan, +27.14% year over year. By category, 24Q3 yeast and deep-processed products/sugar/packaging/other products achieved revenue of 25.9/0.31/0.11/0.69 billion yuan respectively, or +17.8%/+5.5%/+16.3%/+76.5%, respectively. All categories achieved growth, with other categories growing faster. Looking at the subregion, domestic and overseas revenue were +20.7%/+30.2% year-on-year in 24Q3, respectively. Domestic market demand continues to recover (-4.5%/+6.6% year-on-year in 24Q1/Q2, respectively). Looking at the breakdown, small-packaged products are growing faster due to home consumption. Overseas markets are growing faster (+16.7%/+19.0% year-on-year in 24Q1/Q2, respectively), and growth rates are expected to be higher in Europe, Africa, and Asia Pacific. The number of the company's 24Q3 dealers increased net by 1,855, including a net increase of 627 overseas and a net increase of 1,228 domestic dealers.

Raw material costs continued to decline, but gross margin declined due to higher shipping costs+price cuts, and profitability declined slightly. The company achieved a gross profit margin of 21.4% in a single Q3, -3.6 pcts year over year. We speculate that the main factors are: 1) overall benefits on the cost side: lower molasses prices & improved hydrolyzed sugar costs played a positive role; 2) However, the increase in export shipping costs was suppressed to a certain extent, and overall gross margin declined; 3) Affected by the external competitive environment, the company reduced prices for domestic products. In terms of cost ratio, the company's single Q3 sales/management/R&D/finance expense ratio was -0.10/-0.86/-1.18/+0.15pcts, respectively. The company's other earnings declined in 24Q3 (-0.99pcts to 0.75% year over year). Mainly affected by the decline in gross margin, the company's profitability declined slightly. The net profit margin for 24Q3 was -1.26pcts to 7.01% year on year, and the net profit margin for single Q3 after deducting non-return mother was -0.24pcts to 6.51% year on year.

Domestic business is recovering month by month, overseas business continues to increase, the cost side continues to improve during the new season, and cost dividends are expected to continue. The company's overall operations continued to improve, domestic business resumed month by month, overseas maintained a double-digit growth rate, and the Q1-3 growth rate increased quarterly. In terms of additional production capacity, with the release of the company's additional production capacity in Egypt and Russia, it will continue to strengthen the company's competitiveness in overseas markets. On the cost side, domestic+foreign molasses prices continued to decline during the new season, continuing to contribute to profit elasticity.

Profit forecast: We expect the company to achieve revenue of 15.516/17.52/19.639 billion yuan in 24-26, with year-on-year changes of +14.25%/+12.91%/+12.10%, and net profit to mother of 1.331/1.548/1.752 billion yuan, respectively, +4.78%/+13.20% YoY, EPS 1.53/1.78/2.02 yuan/share, respectively, corresponding PE 23.38/20.11/ 17.76 x, maintaining the “Recommended” rating.

Risk warning: Increased industry competition, sharp rise in raw material prices, demand recovery falling short of expectations, etc.