Incident: The company issued the “Notice Concerning the Free Transfer of Minority Shares in Chubang Company”. Langtian Huide, the minority shareholder of Chubang, will transfer 20% of its shares to Yangxi Meishuan (wholly owned by Zhongju Hi-Tech) free of charge. The relevant share transfer procedures were completed on December 5.

Increased efficiency is beneficial to the overall planning of the main business. Chubang will become a wholly-owned subsidiary of Zhongju Hi-Tech (the total registered capital of Chubang Company is still 0.1 billion yuan, of which Delicious Fresh Company holds 80% of Chubang's shares, and Yangxi Meishian holds 20% of Chubang's shares). It is beneficial to the strategic planning of the company's main business, improve the efficiency of management decisions, promote the integration of internal resources, and unify the main health food business. In the context of catering recovery, the company will be able to increase its marketing efforts for Chubang products, thereby expanding its market share and seizing opportunities for the industry to recover.

Increase earnings per share and protect shareholders' rights. In 2021-2023, the average minority shareholders' profit and loss corresponding to 20% of Chubang's shares was 37.8352 million yuan, and the average contribution rate to the company's net profit was 6.31%. From January to September 2024, the minority shareholders' profit and loss corresponding to 20% of Chubang's shares was 63.3175 million yuan. After the completion of this minority share transfer, all of Chubang's net profit will belong to all shareholders of Zhongju Gaoxin, increasing the company's shareholders' earnings per share and effectively increasing the return on net assets.

Investment advice: We expect the company to achieve revenue of 5.402/6.106/6.961 billion yuan in 2024-2026, +5.11%/+13.03%/+14.02%, and net profit to mother of 0.746/0.892/1.077 billion yuan, -56.02%/+19.49%/+20.74%, EPS of 0.95/1.14/1.37 yuan respectively, corresponding PE 24.79/20.74/17.18x, respectively. Maintain the company's “gain” rating.

Risk warning: Risk of policy implementation falling short of expectations; food safety risks; risks such as fluctuations in raw material prices.