Incident: The company issued the “Notice Concerning the Free Transfer of Minority Shares in Chubang Company”, and Yangxi Meishuan (wholly owned by Zhongju Hi-Tech) transferred 20% of the shares of Chubang Company held by Langtian Huide free of charge. The relevant share transfer procedures have been completed. Since then, Chubang has become a wholly-owned subsidiary of Zhonghu Hi-Tech.

Acquire shares in subsidiaries without charge, substantially increasing net profit attributable to mother. The company transferred 20% of Chubang's shares free of charge and has completed the relevant transfer procedures. The average net profit of Chubang Company in 21-23 was 0.19 billion yuan, and the average net profit of Zhongju Hi-Tech after deduction in 21-23 was 0.6 billion yuan. The average minority shareholders' profit and loss corresponding to 20% of Chubang's shares was 0.038 billion yuan, and the average contribution rate to the company's net profit was 6.31%. After the completion of this minority share transfer, it can substantially increase the company's net profit and earnings per share, and enhance the company's value.

24Q3 was adjusted on the basis of operations in the first half of the year, and the current price control effect is relatively good. The company promoted price control in September '24, with the aim of controlling the problem of smuggling in non-main sales areas and main sales areas. Judging from the control results, the current prices in the main sales area have returned to their original level, and dealers are relatively motivated to buy goods.

Q3 The management adjustments have borne fruit, and we expect the reforms to continue to advance. The company's 24Q3 revenue resumed positive growth (24Q3 Yummy Fresh revenue +2.79% YoY). By product, soy sauce/chicken extract chicken powder were +0.5%/+14.0%, respectively.

In addition, the gross profit margin continued to be boosted by the cost-side raw material cost dividend+the company's procurement and production efficiency improvements. The 24Q3 gross margin was +4.95 pcts year-on-year. The company's current price performance is stable after price control, and the inventory level is good. We expect the company's reform process to continue to advance, revenue growth to accelerate, and profit side to continue to be optimized.

Profit forecast: We expect the company to achieve revenue of 5.39/6.095/6.95 billion yuan in 24-26, with year-on-year changes of +4.88%/+13.08%/+14.02%, and net profit to mother of 0.806/0.989/1.169 billion yuan, respectively, -52.53%/22.76%/18.22%, EPS of 1.03/1.26/1.49 yuan/share, respectively, maintaining the “recommended” rating.

Risk warning: Increased industry competition, sharp rise in raw material prices, decline in demand, etc.