Incident: 2024Q1-3 achieved revenue of 10.912 billion yuan, up 13.04% year on year; realized net profit of 0.953 billion yuan, up 4.23% year on year; realized net profit without deduction of 0.839 billion yuan, up 3.44% year on year. Among them, 2024Q3 achieved revenue of 3.738 billion yuan, up 27.14% year on year; realized net profit of 0.262 billion yuan, up 7.02% year on year; realized net profit after deduction of 0.243 billion yuan, up 21.60% year on year.

Domestic revenue improved sharply month-on-month, and overseas revenue accelerated. 2024Q3's yeast and deep-processing products achieved revenue of 2.592 billion yuan, up 17.76% year on year, 8.85% faster than H1; 2024Q1-3 yeast and deep-processing products achieved revenue of 7.711 billion yuan, up 11.69% year on year. 2024Q3's revenue from sugar, packaging, and other main businesses was 0.309, 0.111, and 0.69 billion yuan, respectively, up 5.48%, 16.30%, and 76.54% year on year; revenue from sugar, packaging, and other main businesses in the first three quarters was 0.897, 0.306, and 1.926 billion yuan, respectively, up -17.92%, -4.11%, and 44.17% year on year. By region, 2024Q3 achieved revenue of 2.269 and 1.433 billion yuan respectively, with year-on-year increases of 20.70% and 30.20%, respectively, and 0.89% and 0.89% respectively in the first half of the year. In the first three quarters, domestic and foreign revenues were 6.583 and 4.257 billion yuan respectively, up 6.94% and 21.77% year-on-year respectively. By channel, offline and online revenue of 2.489 and 1.213 billion yuan respectively were achieved in 2024Q3, with year-on-year increases of 25.30% and 22.03%, respectively; offline and online revenue of 7.304 and 3.537 billion yuan respectively in the first three quarters, with year-on-year increases of 14.34% and 8.33%, respectively.

Short-term gross margins are under pressure, dragging down overall profitability. 2024Q3's gross margin fell 3.62 pcts year on year to 21.35%, mainly due to: (1) due to international geopolitics, shipping costs rose sharply, and the wind shipping index rose significantly; (2) 2024Q3's other main business revenue grew the fastest, accounting for an increase, but its gross margin was low, lowering the company's overall gross margin level. 2024Q3's sales, management, R&D, and financial expense ratios were -0.10, -0.86, -1.18, and +0.14 pcts year-on-year to 5.59%, 3.07%, 3.75%, and 0.81%, respectively. 2024Q3's other earnings decreased by 0.023 billion yuan year over year, and credit asset impairment losses increased by 0.012 billion yuan year over year. Taken together, the company's 2024Q3 net sales margin fell 1.59 pcts year-on-year to 6.98%.

Profit forecast: As a domestic yeast leader, the company continues to focus on its main business, and its market share continues to increase. At the same time, overseas business is rapidly expanding, and revenue is expected to maintain steady growth. It is expected that shipping costs will gradually decline, while domestic demand is expected to continue to recover, and overseas is expected to maintain a rapid growth trend. According to the company's three-quarter report, considering that domestic and foreign revenue growth exceeded expectations, but the short-term increase in shipping costs had an impact on profits, we adjusted the profit forecast. The company's revenue for 2024-2026 is 15.199, 16.77, and 18.444 billion yuan (original values were 149.83, 166.58, 184.61), and net profit to mother is 1.358, 1.595, and 1.78 billion yuan, respectively (original values were 13.66, 15.64, 17.93), EPS was 1.56, 1.84 and 2.05 yuan, corresponding PE is 22.9 times, 19.5 times, and 17.5 times, maintaining the “buy” rating.

Risk warning: Global economic growth is slowing; risk of overseas market development falling short of expectations; food safety risks; fluctuating molasses prices; risk of untimely updates to research information.