Key points of investment:

Incident: The company released its three-quarter report. In the first three quarters of 24, the company achieved operating income of 1.723 billion yuan, an increase of 40.08%; net profit to mother was 0.067 billion yuan, an increase of 6.53%; net profit not attributable to mother was 0.023 billion yuan, a decrease of 41.17%.

Looking at a single quarter, 24Q3 achieved revenue of 0.656 billion yuan, an increase of 41.92%; net profit to mother of 0.005 billion yuan, a decrease of 69.71%; and net profit of non-return to mother of 0.003 billion yuan, a decrease of 81.9%.

The consolidated gross margin for the first three quarters of 24 was 18.69%, a decrease of 0.1 pct. The cost rate for the period was 17.11%, an increase of 2.8 pct over the same period. Among them, the sales/management/ R&D/ finance ratio was 5.21%/6.68%/2.92%/2.31%, respectively, with year-on-year change of -0.4pct/+1.1pct/-0.5pct/+2.6pct. The increase in management expenses is mainly due to company expansion, and labor costs and depreciation have increased accordingly. The increase in financial expenses was mainly due to a decrease in exchange earnings and an increase in interest.

Projects under construction are progressing steadily, and overseas production capacity is being actively deployed. The company purchased a new plot of land in Laibin, Guangxi, mainly for the “Project with an annual output of 0.1 million tons of sugar bagasse biodegradable environmentally friendly material products”. The plant has been built and is currently in initial operation. The company set up a subsidiary in Thailand and invested in the establishment of a production base. Currently, the factory leased by the company has been officially put into operation, and the purchased Thai plot plant is under construction as planned. The construction of the Ningbo Lanshan Plant project has been completed, and some equipment is in operation and production. At present, production capacity has begun to be initially released.

Profit forecast and rating: We expect the company's net profit for 24-25 to be 0.14/0.17 billion yuan, respectively, and the corresponding PE on October 30 will be 21/18 times. Referring to comparable companies, PE was given 22-24 times in 24 years, and the corresponding reasonable value range was 16.6-18.1 yuan/share, giving a “superior to the market” rating.

Risk warning: Export demand has declined, production capacity expansion falls short of expectations, risks of plastic policy risks, risk of large fluctuations in raw material prices, and risk of impairment of goodwill.