On October 30, 2024, Angel Yeast released its report for the third quarter of 2024.

Key points of investment

Market demand has clearly recovered, and high shipping costs have lowered gross profit

In 2024Q1-Q3, the company achieved revenue of 10.912 billion yuan (up 13%), net profit to mother of 0.953 billion yuan (same increase of 4%), and net profit of 0.839 billion yuan after deducting non-attributable net profit of 0.839 billion yuan (same increase of 3%). Among them, the 2024Q3 company's revenue was 3.738 billion yuan (same increase of 27%), mainly due to slow restoration of domestic baking and continued high growth in overseas business. Net profit to mother was 0.262 billion yuan (same increase of 7%), net profit not attributable to mother was 0.243 billion yuan (same increase of 22%). On the profit side, 2024Q3's gross margin decreased by 4 pct to 21.35%, mainly due to a sharp increase in shipping costs. The sales/management expenses ratio decreased by 0.1 pct/1 pct to 5.59%/3.07%, respectively. Combined with the extension of government subsidies and project consolidation, the net margin decreased by 2 pct to 6.98%.

Yeast extract releases potential energy, and overseas business continues to grow at a high rate

By product, the revenue of 2024Q3's yeast and deep-processed products/sugar products/packaging products/other products was 25.92/0.309/0.111/0.69 billion yuan respectively, up 18%/5%/16%/77% respectively. Molasses prices continued to decline in the third quarter, cost pressure continued to ease, and the main yeast business grew significantly. Looking at the subregion, the domestic revenue of 2024Q3 was 2.269 billion yuan (up 21% from the same period). Due to downgraded consumption and increased consumption at home, small packaging recovered year-on-year. At the same time, increased production of condiments and snack foods boosted demand for yeast extract, and domestic business recovered month-on-month. 2024Q3's overseas revenue was 1.433 billion yuan (30% increase), continuing the high upward trend. Among them, the population in the Middle East/Africa/Europe/Asia Pacific region continued to rise, and the Q1-Q3 revenue growth rate reached more than 20%. The company accelerated production capacity construction. The Egyptian plant is expected to be put into operation in the fourth quarter, the Indonesian project site selection will continue, and a sales company will be set up in Germany to assist with yeast extract exports. South America's Q1-Q3 revenue also increased by more than 10%, mainly affected by fluctuations in shipping costs in October. Shipping costs declined marginally in October, but the rebound in transportation demand caused short-term transportation Efforts are tight, and attention is being paid to the subsequent pace of overseas transportation. North America's revenue in the third quarter was flat year on year, and YE performed well. Subsequent company production capacity construction mostly revolved around yeast extract and derivatives, consolidating the global leading edge.

Profit forecasting

As a yeast leader, we are optimistic that the company will continue to expand globally with its own scale/channel/service advantages. In October, the downward trend in molasses prices continued, shipping costs eased, and capacity bottlenecks gradually broke through as various projects were completed and put into operation. We are concerned about capacity recovery and the progress of delayed disbursement of government subsidies. We expect profit performance to improve sequentially in the fourth quarter. According to the 2024 three-quarter report, we adjusted the 2024-2026 EPS to 1.56/1.77/2.03 yuan (previous value was 1.57/1.82/2.13 yuan), and the current stock price corresponding PE was 24/21/18 times, respectively, to maintain a “buy” investment rating.

Risk warning

Macroeconomic downturn, consumption recovery falls short of expectations, production capacity construction falls short of expectations, fluctuating raw material prices, overseas expansion falls short of expectations, etc.