Core Viewpoint - The company is experiencing a positive operational trend, with stable domestic business and strong growth in overseas markets, alongside potential profit improvements due to declining raw material costs and the expansion of new business segments [1][3]. Sales Performance - Domestic demand for yeast and its derivatives remains stable, with inventory reduction efforts showing initial success in Q1 2025. Revenue from domestic operations improved sequentially in Q2 2025, continuing into Q3 2025 [1]. - Overseas revenue grew significantly in H1 2025, with a year-on-year increase of 22.6%. The demand for dry yeast products in developing countries remains strong, and the company's subsidiary in Egypt is performing well [1][2]. Profitability - The company anticipates a more than 10% year-on-year decline in comprehensive costs for 2025 due to lower molasses prices. Stable pricing competition and reduced shipping costs are expected to enhance profitability [2][3]. - The company’s production capacity utilization in overseas factories is high, and ongoing expansion is expected to further release economies of scale [2]. New Business Development - The company is actively developing new business segments such as yeast protein, which has broad applications in beverages, meat products, and snacks. The focus is on market development and capacity building [2][3]. - A project to establish a bio-manufacturing center was announced on June 27, 2025, aimed at enhancing the company's innovation capabilities in biological manufacturing [2]. Outlook - The company is optimistic about maintaining stable domestic demand and continued growth in overseas markets, with new business segments expected to contribute to revenue growth. The anticipated decline in molasses costs and shipping fees is expected to accelerate profit potential [3]. - Future capacity planning will focus on meeting overseas market demand, with the Indonesian factory expected to commence operations in the second half of 2026 [3]. Profit Forecast and Valuation - The company forecasts net profits of 1.66 billion, 1.94 billion, and 2.21 billion yuan for 2025-2027, representing year-on-year growth of 25.0%, 17.3%, and 13.9% respectively. Corresponding EPS is projected at 1.91, 2.24, and 2.55 yuan [4]. - A target price of 45.75 yuan is maintained, based on a 24x PE ratio for 2025, reflecting confidence in the company's growth trajectory [4].

Investment Rating - The report maintains a "Buy" rating for the company, indicating a positive outlook for future performance [4][6]. Core Views - The company is expected to enter a profit release cycle starting in 2025, driven by favorable cost and capacity dynamics, alongside potential price increases due to demand recovery [3][4]. - Historical profit release cycles have shown that the company typically outperforms the food and beverage sector during these periods, with significant profit elasticity contributing to excess returns [1][14]. Summary by Sections Stock Price Review - The company has historically demonstrated excess returns during profit release cycles, particularly noted in years such as 2009, 2016-2018, and 2020, attributed to faster profit elasticity release compared to the sector [1][14]. Profit Cycle Review - The report highlights three historical profit release cycles: 1. In 2009, net profit margin increased by 6.8 percentage points, driven by accelerated overseas revenue growth and a decline in costs [2][19]. 2. From 2015 to 2017, the company experienced a cumulative net profit margin increase of 10.7 percentage points, aided by reduced depreciation pressure and proactive price increases amidst a favorable demand environment [2][33]. 3. In 2020, a strong demand for small packaging products led to a 3.6% increase in net profit margin, primarily due to proactive pricing strategies [2][51]. Current Outlook - The company is expected to maintain double-digit revenue growth, with domestic demand stabilizing and overseas markets showing high growth potential [3][4]. - The cost cycle is anticipated to benefit from a decline in sugar molasses prices, with projections indicating a significant drop to 1000-1100 RMB/ton by January 2025 [3][4]. - The production capacity cycle is nearing the end of its investment phase, which is expected to alleviate depreciation pressure post-2023 [3][4]. - Historical trends suggest that the company can increase prices in response to demand recovery, particularly in a balanced capacity environment [3][4]. Financial Forecast and Valuation - The company is projected to achieve net profits of 1.64 billion, 1.92 billion, and 2.19 billion RMB for the years 2025, 2026, and 2027, respectively, reflecting year-on-year growth rates of 23.6%, 17.1%, and 14.4% [4][5]. - The current price-to-earnings (P/E) ratios for the forecasted years are 21, 18, and 16 times, indicating that the stock is still trading at historically low valuations [4][5].