The Indonesian factory is planned to be built, and the process of going overseas has come to an end

On September 25, the company announced that it plans to build an Indonesian factory to cover the Southeast Asian market, and ease the problem of the company's insufficient overseas production capacity. Furthermore, the company announced that it plans to issue corporate bonds with a total size of no more than 2 billion yuan (inclusive), partly to replace stock loans, while also providing financial support for overseas production capacity layout during the 15th Five-Year Plan period. Looking ahead, benefiting from improved demand in the main yeast industry, accelerated penetration of derivatives such as YE, and continued growth in overseas markets, the company is expected to resume growth potential; on the profit side, as domestic and foreign molasses prices fall, subsequent cost pressure is expected to gradually be released. The company will continue to divest sugar production and other businesses with low gross margins, optimize its business structure, and strive to improve overseas supply capacity and reduce dependence on exports. It is also expected to enhance the profitability of overseas business. EPS is expected to be 1.58/1.74/2.08 yuan for 24-26. Refer to comparable companies' average PE value of 24x in 24 years (Wind agrees expectations), and the target price is 37.86 yuan, and the target price is 37.86 yuan, “buy”.

Establishing an Indonesian subsidiary and further deepening overseas layout

The company announced the establishment of an Indonesian subsidiary in a joint venture with Indonesia's San'an Company. Indonesia's San'an Company specializes in the production, processing, and provision of raw materials for palm oil and sugar cane. Angel and Sanan each invested 0.305/0.076 billion yuan to set up subsidiaries. After the establishment of the subsidiary, they plan to use 0.036 billion yuan (excluding tax) to purchase land to build a plant, and related production capacity mainly radiates Southeast Asia. As the fourth most populous country in the world, Indonesia has strong demand for yeast, sufficient raw materials, and convenient shipping, which helps the company further deepen its overseas layout and mitigate the company's insufficient overseas production capacity. In addition, the company also announced that it plans to issue corporate bonds with a total size of no more than 2 billion yuan (inclusive). The issuance period is no more than 20 years (inclusive). Some of the newly issued bonds will be used to replace stock loans, and at the same time provide financial support for overseas production capacity layout during the 15th Five-Year Plan period to help the company continue to develop.

The month-on-month improvement trend on the revenue side is clear. The profit side expects molasses prices to fall back to the revenue side in the new season. The overseas business (24H1 revenue accounts for 40%) is expected to maintain the growth rate. 24H1 revenue is +17.9% year-on-year, with strong growth. Dry yeast products continue to have a differentiated competitive advantage, and YE products also continue to penetrate overseas; domestic business (60% of 24H1 revenue) has a clear month-on-month improvement trend. The C-side small packaging products benefit from the return of customer orders after the company's price adjustments. month-on-month ratio improvements. On the profit side, as domestic and foreign molasses prices fall, subsequent cost pressure is expected to gradually be released. The company will continue to divest sugar and other businesses with low gross margins, focus on the yeast and derivatives business, and optimize the business structure. Furthermore, the company's overseas production capacity will gradually be put into operation to enhance overseas supply capacity, reduce dependence on exports, and is also expected to enhance the profitability of overseas business.

Looking forward to continued business repairs and maintaining a “buy” rating

Taking into account that the price of molasses is expected to enter a downward cycle and the financial expenses caused by the proposed issuance of bonds, we adjusted the profit forecast. The estimated EPS is 1.58/1.74/2.08 yuan (previous 1.60/1.80/2.07 yuan) for 24-26, and the target price is 37.86 yuan (previous 38.39 yuan), maintaining the “buy” rating.

Risk warning: Increased competition, industry demand falling short of expectations, food safety issues.