White sugar resonates with the ketchup industry, and the company's 23Q3 revenue and return net profit have increased significantly compared with the same period last year, reaching a record high. We believe that based on the layout and scale advantages of the whole industry chain, the company's sugar business has established a strong and stable ability of business research and judgment, and grasped the market rhythm and fully realized the performance through a sound procurement, processing and sales network. The export price of ketchup continues to be booming. As the second ketchup processing enterprise in the world and the first in China, the company has fully benefited. Tomato business performance flexibility release. We raise the company's EPS forecast for 2023-2025 to 0.79 EPS 0.87 PE 0.93 yuan, with reference to the agricultural products processing sector comparable to listed companies in 2023, the average expected Wind valuation of about 18x PE, taking into account the high prosperity of the company's industry, give the company 15x PE valuation in 2023, corresponding to the target price of 12 yuan, maintain the "buy" rating.

Profit growth exceeded expectations and performance reached an all-time high. According to the company's three-quarter report for 2023, 23Q3 achieved revenue of 11.15 billion yuan, an increase of 49% over the same period last year, and a net profit of 670 million yuan, a sharp increase of 426% over the same period last year, deducting 640 million yuan of non-parent net profit, a year-on-year increase of 519%. The company achieved a net profit of 1.44 billion yuan in the first three quarters of 2023, an increase of 89%. 23Q3 domestic sugar prices have risen sharply, the company accurately studies the market trend, seizes the market opportunity, reasonably controls the purchase and sale rhythm, and the revenue, return net profit and deduction non-home net profit all reach record highs.

The price of sugar is high and the layout of the whole industry chain catalyzes the growth of performance. The rapid rise in domestic sugar prices in the third quarter of 2023 directly contributed to the substantial increase in revenue and profits of the company. According to Choice, the average spot price of white sugar in 23Q3 is 7287 yuan per ton, an increase of 25.3% over the same period last year. We believe that the sugar industry boom continues, the company's sugar business performance contribution will remain high, market share and profitability are expected to further increase. On the one hand, the company has established a strong business information research and judgment ability based on the layout of the whole industry chain, global operation and huge volume of operation. On the other hand, based on the perfect purchasing, logistics, sales network and efficient processing capacity, the company can optimize the pace of procurement, processing and sales in time according to the results of business research and judgment, and fully realize the performance.

In addition, the domestic 2023 racer 24 pressing season is about to begin, and the main sugarcane producing areas in Guangxi are in good growth conditions this season. According to the Ministry of Agriculture and Village, domestic sugarcane production in the new season will increase by 10.4% compared with the same period last year, and the company's own sugar production in the new season is expected to increase.

The export price of ketchup has reached an all-time high and its profitability continues to rise. The company is currently the largest tomato processing enterprise in China and the second in the world. 23Q3 domestic tomato products export prices are booming, superimposed by the continuous growth of demand at home and abroad, we believe that the company's tomato business contributes a lot to the company's performance growth. 1) in terms of price, the export of ketchup is booming. Under the influence of the tight supply of overseas ketchup, the rising inflation rate in Europe and the United States and the appreciation of the US dollar against the RMB, the export price of large-packaged ketchup in China continues to rise. According to the General Administration of Customs, the average export price of 23Q3 ketchup in China's large packaging (> 5kg) was 1213 US dollars / ton, an increase of 28.0 percent over the same period last year, of which the average export price reached an all-time high in September 2023. Affected by the frequent high temperatures and droughts in European tomato producing areas this year, we expect that the supply of ketchup in Europe will remain tight, and the export price of ketchup in China will continue to be prosperous. 2) on the demand side, the rigidity of overseas demand is high, and the potential of domestic consumption is huge. On the one hand, as a condiment with rigid demand in Europe and the United States, the demand for ketchup remains high. Due to the tight supply of ketchup overseas, part of the demand has shifted to China, and the domestic export volume of ketchup has increased. On the other hand, with the rapid rise of "tomato taste" in the domestic catering consumption scene and the gradual cultivation of tomato products consumption habits, we believe that the space potential of domestic tomato products market will be gradually released. Based on the export business of large packaging, the company continues to expand the domestic business of small packaging tomato products. We believe that the contribution of the company's tomato business will increase steadily in the future.

Risk factors: trade policy change; natural disaster risk; sugar price fluctuation risk; rapid recovery of ketchup supply in overseas markets; exchange rate drastic change risk; geopolitical risk.

Profit forecast, valuation and rating: domestic sugar and ketchup prices resonate, the company's 23Q3 revenue and return net profit hit an all-time high. We believe that the company's sugar business based on the layout of the whole industry chain and scale advantages, to build a strong and stable business research and judgment capacity, can optimize the pace of procurement, processing and sales, and fully cash in profits. The tomato business fully benefits from the upside of tomato sauce scene and contributes more performance flexibility to the company.

We raise the company's EPS forecast for 2023-2025 to 0.79 Wind 0.87 PE 0.93 yuan (the original forecast is 0.52 Universe 0.65 yuan). With reference to the agricultural products processing sector, we can compare the listed companies (Guannong shares, Bailong Chuangyuan, Daoguan) with an average valuation of about 18 times PE in 2023. Considering the high level of the industry boom, we give the company 15x PE valuation in 2023, corresponding to the target price of 12 yuan, and maintain the "buy" rating.