Jinhe Industrial announced its three-quarter report on October 30: Q3 revenue of 1.5 billion yuan, +6%/+14% year on month, net profit of 0.16 billion yuan to mother, +1%/+38% year on month. In the first three quarters, the company achieved revenue of 4 billion yuan, or -1% YoY; net profit attributable to mother was 0.41 billion yuan (net of 0.38 billion yuan), or -27% YoY (not -22% YoY).

The company's third-quarter results were basically in line with our forward-looking expectations (0.16 billion yuan). Considering that with support from the demand side and the cost side, the future sugar boom is expected to recover and maintain the “gain” rating.

The sugar substitute industry is affected by supply pressure and overseas warehousing. The company's product prices have declined year on year since this year, when the supply-side pressure of the industry is compounded by overseas inventory. According to Baichuan Yingfu, the average price of sucralose/acemit/methylmaltose/maltol ethyl enterprises was -31%/-28%/-8%/+3% year-on-year, respectively, to 12.3/0.037/0.083/0.069 million/ 0.069 millions/ton, according to Baichuan Yingfu. Since the third quarter, the company has continued to raise prices under pressure from the cost side. Among them, the 24Q3 average price was +22%/-5%/+7%/+6% month-on-month, respectively, to 13.4/0.035/0.098/0.077 million/ton. The company's gross margin for the first three quarters of '24 was -3.6 pct yoy to 20.2%, and 24Q3 gross margin -3.9 pct yoy to 19.5%.

Sucralose exports increased year-on-year in September, and the future sugar boom is expected to recover. According to Baichuan Yingfu, sucralose exports were +5%/-20% month-on-month to 1,617 tons in September '24. As of October 30, the corporate price of sucralose/acesmit/methylmaltose/maltol ethyl was 21.0/0.039/0.102/0.082 million yuan/ton, compared to +100%/+11%/+7%/+9% respectively at the end of June this year. Very affordable. We expect that with the recovery in domestic demand for downstream sugar-free beverages and the end of overseas inventory removal, the future sugar boom is expected to recover with support from both the demand side and the cost side.

The investment project is progressing smoothly. It is planned to invest in the construction of a gasification replacement project for synthetic ammonia powder coal. According to the third quarterly report, the company's project under construction at the end of 24Q3 was 0.3 billion yuan. According to the company's announcement on October 30, the company plans to invest in the construction of a gasification project with an annual output of 0.2 million tons of synthetic ammonia powder coal to replace backward processes. The total investment of the project is 2 billion yuan, and the construction period is 24 months, which will help the company reduce production costs. According to the 2016 semi-annual report, the company completed the construction of the main project of the “Dingyuan Phase II Project”, including major projects with an annual output of 0.6 million tons of sulfuric acid, 0.06 million tons of ionic membrane caustic soda, 0.06 million tons of ionic membrane potassium and 0.15 million tons of hydrogen peroxide, etc., and has entered trial production one after another.

Profit forecasting and valuation

We estimate that the company's net profit for 24-26 will be 0.72/1.02/1.26 billion yuan, +2%/+43%/+23% year-on-year, corresponding EPS of 1.26/1.79/2.21 yuan. Comparable to the company's 25-year Wind unanimously expected the average PE value to be 10 times. Considering the company's technological advantages, leading position in the industry, and growth in investment projects, the company was given 14 times PE in 25 years, with a target price of 25.06 yuan to maintain “increase in holdings”

ratings.

Risk warning: There is a risk that demand for sugar substitutes will continue to be sluggish, and the risk of large fluctuations in raw materials.