ANGEL YEAST(SH:600298) HTSC·2026-01-14 11:44Investment Rating - The report maintains a "Buy" rating for the company with a target price of 55.55 RMB, reflecting a 24x PE for 2026 [6][8]. Core Insights - The company is a leading player in the global yeast industry, holding a market share of 55% in China and 22% globally as of 2024, ranking first and second respectively by capacity [17]. - The report addresses concerns regarding revenue stability and profit volatility, indicating that domestic demand remains resilient while overseas markets present significant growth opportunities [17][18]. - Short-term profit margins are expected to improve as the company is currently at a cyclical low, with a projected net profit margin of 8.7% for 2024, below the historical average of 11.1% since 2000 [20]. Revenue Analysis - The company's revenue distribution for Q1-Q3 2025 shows a split of 56% domestic and 44% overseas, with traditional yeast demand in China expected to grow steadily due to the expansion of the baking industry [18]. - Yeast extract (YE) products are anticipated to replace traditional chemical flavor enhancers, with a theoretical demand space in China nearing 400,000 tons, indicating substantial growth potential [18]. - The overseas market is characterized by competitive advantages in differentiated dry yeast products, with successful penetration into major clients like Nestlé and Unilever [18]. Profit Analysis - The company is positioned for short-term profit elasticity and long-term reduction in profit volatility, driven by factors such as declining molasses prices and improved cost control capabilities [20]. - The anticipated procurement price for molasses in the new season is expected to be around 800-900 RMB per ton, a decrease of 250-350 RMB per ton year-on-year, which is likely to enhance profit margins in 2026 [20]. - Long-term profit stability is expected to be supported by enhanced pricing power, reduced capital expenditure impacts, and cost savings from overseas market expansions [20][21]. Market Position and Competitive Advantages - The company has established strong barriers to entry in the yeast production sector due to the high capital investment required and the complexity of cultivating high-quality strains [2]. - The demand side shows strong customer loyalty, particularly in B2B segments, supported by a vast distribution network and brand recognition [2]. - The company is actively expanding its production capacity, with plans to reach over 600,000 tons by 2030, which will help alleviate supply-demand imbalances and support market share growth [19].