Incident: The company released its 2024 semi-annual report. In the first half of 2024, the company achieved operating income of 14.956 billion yuan, a year-on-year increase of 17.52%, and net profit to mother of 0.863 billion yuan, an increase of 12.22% over the previous year. Among them, Q2 achieved revenue of 7.145 billion yuan in a single quarter, down 9.90% year on year, down 8.54% month on month, and net profit to mother 0.422 billion yuan, down 14.64% year on year and 4.14% month on month.

Comment:

A high percentage of dividends in the middle of the year, and shareholder returns continued to be realized: the company's mid-year performance reached a record high. Under the high increase in performance, the company paid semi-annual dividends for two consecutive years. According to the company's “2024 Mid-Term Profit Distribution Plan”, based on the company's total share capital of 2,138,848,228 shares on June 30, 2024, a cash dividend of RMB 2 (tax included) will be distributed, for a total of RMB 427,769,645.60, accounting for 49.60% of the net profit attributable to shareholders of common shares of listed companies in the company's 2024 semi-annual consolidated statement.

Sugar prices declined, and the company bucked the trend and achieved performance growth. The sugar business is the core of the company and accounts for more than 90% of the company's revenue. In terms of self-produced sugar, the spot price of 2024H1 white sugar fluctuated downward, falling from a high of about 6,800 yuan/ton in April to about 6,400 yuan/ton in early September. Under downward pressure on sugar prices, the company relied on a stable industrial chain integration model and expansion of the downstream processing side to achieve a contrarian increase in performance. The company has now formed an industrial chain integrating domestic and foreign sugar production, imported sugar refining and sales. The 24Q2 Zhangzhou Sugar Industry has been completed and put into operation. Currently, the company's sugar refining production capacity exceeds 2 million tons/year. In the long run, the sugar refining business has effectively extended the company's sugar industry chain, helping the company surpass the cycle and achieve long-term growth.

Increase R&D and innovation, focus on brand marketing, and further strengthen the tomato business. In terms of tomato business, the company is based on upstream cultivation, and the quantity and quality of raw materials have risen sharply. In terms of processed products, the company increased R&D. In the first half of 2024, R&D expenses were 0.03 billion yuan. Direct investment in R&D reached a record high in the same period, with a year-on-year increase of 175.33%. On the downstream sales side, the company attaches great importance to brand marketing and has opened up online and offline sales channels. In the first half of the year, the company's domestic sales ratio reached 41%. The production of small-packaged sauce rose sharply, and the annual production of tomato powder increased. The total number of distribution outlets for the company's products increased 70% over the previous year. It has been listed and distributed in major terminal stores such as Walmart, Jiajiayue, Yonghui, Jingkelong, and Fat Donglai. Online, it has become the number one brand for tomato products on e-commerce platforms in JD and Tmall.

Maintaining a “buy” rating: As one of the largest sugar producers and traders in China, the company maintained market profits with its product advantages, and still achieved an increase in performance during the sugar decline cycle. Furthermore, the tomato business continues to increase R&D investment and brand building, and market recognition continues to increase. We are optimistic about the company's development prospects. We raised the 2024 net profit forecast to 2.247 billion yuan (up 66.20% from the previous forecast), raised the 2025 net profit forecast to 2.553 billion yuan (up 54.54% from the previous forecast), and added the 2026 net profit forecast to 3 billion yuan, corresponding EPS of 1.05/1.19/1.40 yuan, maintaining the “buy” rating.

Risk warning: the risk of exchange rate changes, the risk of changes in the sugar industry's import policy, and bottlenecks in tomato market expansion.