Incident Overview

The company achieved revenue of 10.912 billion yuan in 24Q1-Q3, +13.04% year-on-year, net profit to mother of 0.953 billion yuan, +4.23% year-on-year, after deducting non-attributable net profit of 0.839 billion yuan, or +3.44% year-on-year. The company achieved revenue of 3.738 billion yuan in 24Q3, +27.14% year-on-year, net profit of 0.262 billion yuan, +7.02% year-on-year, after deducting non-attributable net profit of 0.243 billion yuan, or +21.60% year-on-year.

Analytical judgment:

Revenue growth accelerated month-on-month, and business trends continued to improve

The Q3 company continues to focus on the general requirements of “increasing sales volume, competing for scale, strengthening products, and protecting profits”, and has achieved steady scale expansion. Revenue also increased 27.14% to 3.738 billion yuan. Revenue growth increased sequentially, and its operating potential continued to improve.

By product, Q3's yeast and deep-processed products/sugar products/packaging/other businesses achieved operating revenue of 25.9/0.31/0.11/0.69 billion yuan, respectively, +17.8%/+5.5%/+16.3%/+76.5%, respectively. The main business yeast and deep-processing products increased rapidly. We believe that the company's core scenarios such as pasta baking, YE, and animal nutrition have all grown well.

By region, Q3's international business adjusted its market strategy flexibly, and its operating efficiency improved markedly. It continued to maintain a high growth rate, achieving revenue of 1.43 billion yuan, a year-on-year increase of 30.2%; domestically, it achieved restorative growth, achieving revenue of 2.27 billion yuan, or +20.7% to 22.7 billion yuan over the same period last year.

By channel, Q3's offline/online channels achieved revenue of 2.49/1.21 billion yuan respectively, +25.3%/+22.0%, respectively. The company achieved a combination of online+offline full-network and omni-channel sales.

The decline in gross margin made profit growth slower than revenue

On the cost side, Q3 company's gross margin fell 3.6 pct year on year to 21.4%, and the cost side increased significantly. On the cost side, Q3 companies' sales/management/R&D/finance expenses were 5.6%/3.1%/3.8%/0.8%, respectively, compared with -0.1/-0.9/-1.2/+0.2pct in the same period last year. Expense control was better, and the overall cost ratio decreased significantly year-on-year. Decreased income tax rates have also boosted profits. Taken together, Q3's revenue achieved relatively rapid growth, but the increase on the cost side was large, which dragged down profit. The profit increase was less than revenue, increasing 7.8% year over year to 0.262 billion yuan. The corresponding net income interest rate decreased by 1.3 pct to 7.01% year on year.

Business continues to improve, and global influence is further enhanced

Q3 The company's domestic and international business have achieved good growth. We are optimistic that the company will continue to improve and the domestic yeast business will grow steadily; as new production capacity is put into operation abroad in Egypt and Russia, providing capacity support for the company's overseas market expansion, which is expected to further enhance the company's competitive advantage and market share in overseas markets and promote international layout. On the cost side, the procurement cost of molasses, the core raw material, is on a downward trend. Combined with the cost dividend of hydrolyzed sugar, the cost pressure continues to ease. We are optimistic that the company will continue to grow steadily and further achieve the goal of “the world's largest yeast company and a world-class biotechnology company”.

Investment advice

Referring to the latest performance report, we maintained the 24-26 revenue forecast of 15.618/17.43/19.068 billion yuan, and lowered the 24-26 EPS forecast of 1.58/1.82/2.11 yuan to 0.155/0.175/0.2 billion yuan. The PE valuation of the current stock price corresponding to the closing price of 36.36 yuan on October 31, 2024 is 23/20/18 times, respectively, maintaining the purchase rating.

Risk warning

The decline in costs fell short of expectations, production capacity fell short of expectations, and industry competition intensified