Incident: The company released its 2022 annual report. In 2022, the company achieved revenue of 1,401 million yuan, +32.99% year on year; achieved net profit attributable to the mother/net profit after deducting the return to the mother of 179/149 million yuan, +50.92%/+74.66% year on year. In 22Q4, the company achieved revenue of 422 million yuan, +23.72% over the same period last year; realized net profit attributable to the mother/net profit after deducting the return to the mother was about 0.03/06 million yuan, compared to -90.49%/-126.37% compared to the previous forecast range.

The main business grew rapidly, relying on domestic and foreign demand to expand market share. The company's plant extraction business achieved revenue of 1,268 million yuan, +28.53% year on year; of these, natural sweeteners achieved revenue of 889 million yuan, +40.36% year on year, leading the industry growth rate, accounting for 63% of revenue, which became the main driving force for the company's performance growth. 22Q4 plant extracts/natural sweeteners achieved revenue of 3.42/273 million yuan, +16.17% /+26.73 percent year on year.

The depth of cooperation between the company and Firmen-Italy continued to increase in 2022, with annual sales of 89.545 million US dollars (22Q4 contributed 257.807 million US dollars), an increase of 48.62% over the previous year, and the cumulative progress of contract execution reached 60.26% (based on the guaranteed amount of US$345 million).

With the rise of a healthy sugar reduction trend in the domestic market, demand for natural sweeteners has accelerated. The company has seized the opportunity to seize domestic emerging market share at an accelerated pace. Relying on comprehensive advantages such as brands and R&D, it has reached business cooperation with several mainstream new domestic food and beverage brands. Customers cover various fields such as tea, snack food, and dairy products.

Profitability and expenses were stable throughout the year, and Q4 profits were affected by overseas business. The company achieved a gross profit margin of 30.80% in 2022, +0.99pct over the previous year; of these, 22Q4 gross profit margin was 23.01%, -7.45 pcts year on year. In terms of expenses, the company's sales/management/R&D/finance expense ratio in 2022 was 3.21%/7.45%/3.16%/0.56%, respectively, compared to -0.26/-0.93/-0.54/-1.85pcts. The overall cost control effect was remarkable, and operational productivity continued to improve; of these, 22Q4 was 3.83%/10.47%/2.11%/0.65%, compared to +0.36/+2.09/-1.59/-1.76pcts. It is estimated that the increase in management expenses was partly due to equity incentive expenses impact. Based on the above, the company achieved net interest rates of 12.76%/0.70% in 2022 and Q4 alone respectively, which was +1.52/-10.55pcts compared to the previous year. The main reason for the decline in gross margin and net interest rate of 2022Q4 is that the company has calculated asset impairment preparations of 25.2819 million yuan and litigation compensation of 1.2 million US dollars for industrial hemp raw materials for various assets such as inventory and accounts receivable. At the same time, the fourth quarter was the centralized acquisition season for the company's raw materials, and the company increased its strategic reserves of raw materials.

The production capacity of the main business expanded, and the entry into biosynthesis raised technical barriers. In terms of stevia extract, the company successfully completed a non-public offering project in 2022. Some of the capital raised was used to expand stevia production capacity. Overall, the average annual sales revenue after delivery is expected to reach 1,457 million yuan, contributing an average annual profit of 155 million yuan. In terms of Luo Han Guo extract, the company invested in completing the technical transformation project of the Luo Han Guo extraction production line, which further increased the production capacity of large single Luo Han Guo products. Overseas industrial hemp projects achieved mass production. Although sales fell short of expectations due to external objective reasons, it is expected that profits will be achieved in 2023 as overseas opening-up policies are promoted and customer development accelerates. In 2022, the company introduced advanced equipment to expand the scale of production of stevia microbial enzyme conversion. At the same time, it cooperated with Jiangnan University to promote the development and industrialization of microbial synthesis technology for luohan glycoside, while enriching the range of natural sweeteners while enhancing the company's technical barriers and strengthening the moat advantage.

Profit forecast and investment rating: Based on annual report performance, we expect the company's net profit of 23-25 to be 2.51/3.52/453 million yuan, +40.23%/+40.36%/+28.70%, EPS is 0.34/0.47/0.61 yuan, corresponding to the current stock price PE is 29x/21x/16x respectively, maintaining the “highly recommended” rating.

Risk warning: The epidemic has repeatedly affected international trade, raw material costs have fluctuated greatly, order renewals for major customers, industrial hemp business has fallen short of expectations, etc.