JHSY(002597) HTSC·2024-10-31 07:55Investment Rating - The investment rating for Jinhe Industrial is maintained at "Buy" with a target price of RMB 25.06 [7]. Core Views - The report indicates that Jinhe Industrial's Q3 net profit increased by 1% year-on-year to RMB 1.6 billion, with a revenue of RMB 1.5 billion, reflecting a 6% quarter-on-quarter increase and a 14% year-on-year increase. The company achieved a total revenue of RMB 4 billion in the first three quarters, down 1% year-on-year, with a net profit of RMB 4.1 billion, a decrease of 27% year-on-year [1]. - The report suggests that the demand and cost support for sugar substitutes is expected to recover, maintaining the "Buy" rating [1]. Summary by Sections Financial Performance - In Q3, Jinhe Industrial reported a revenue of RMB 1.5 billion, up 6% quarter-on-quarter and 14% year-on-year. The net profit for Q3 was RMB 1.6 billion, reflecting a 1% increase quarter-on-quarter and a 38% increase year-on-year. For the first three quarters, the total revenue was RMB 4 billion, down 1% year-on-year, with a net profit of RMB 4.1 billion, a decrease of 27% year-on-year [1][2]. Industry Analysis - The sugar substitute industry is facing supply pressures and inventory reductions overseas, leading to a decline in product prices. The average prices for various sugar substitutes have decreased year-on-year, with specific declines of 31% for sucralose and 28% for acesulfame [2]. - Despite the price declines, Jinhe Industrial has been increasing prices since Q3, with average prices for Q3 showing increases of 22% for sucralose and 6% for maltodextrin [2]. Future Outlook - The report anticipates a recovery in the sugar substitute market due to a rebound in domestic demand for sugar-free beverages and the nearing end of inventory reductions overseas. This recovery is expected to be supported by both demand and cost factors [3]. - Jinhe Industrial is also progressing well with its investment projects, including a planned investment of RMB 2 billion for a new synthetic ammonia gasification project, which is expected to reduce production costs [4]. Profit Forecast and Valuation - The forecast for Jinhe Industrial's net profit for 2024-2026 is RMB 7.2 billion, RMB 10.2 billion, and RMB 12.6 billion, respectively, with corresponding EPS of RMB 1.26, RMB 1.79, and RMB 2.21. The target price is set at 14 times the PE ratio for 2025, resulting in a target price of RMB 25.06 [5][6].