Angel Yeast（600298）：2Q24 Earnings Beat； Operating Performance Improved Qoq

Rating (Maintain):BUYTarget price (RMB)38.39 Huatai Research Interim Results Review 13 August 2024 | China (Mainland) Food SAC No.E0570523100001AnalystGONG YuanyueSFC No. BQL737woosuanluen/buce+(86)212997 2228 2Q24earnings beat; operating performance improved qoq Angel Yeast's 1H24 revenue/attributeble NP/recurring attributableNPwereRMB7,180/690/600mn (+6.9/+3.2/-2.5% yoy) and for 2Q24 were RMB3,700/370/300mn (up 11.3/17.3/7.3% yoy), beating our estimates (2Q24 revenue/attributableNP: up 8/6% yoy). For 1H24, domestic/overseas revenue rose 0.9/17.9% yoy toRMB4.31/2.82bn. For 2Q24, domestic business improved qoq, while the overseasarm maintained high growth. Owing to a demand rally in the yeast main business,increasing penetration of supporting products (ie, YE), rising sales of yeast protein,and sustained growth in the overseas market, we expect the company to resumegrowth momentum. For profit, with dipping molasses prices at home and abroad,we see reduced cost pressure subsequently. We estimate 2024/2025/2026 EPS atRMB1.60/1.80/2.07, and value the stock at 24x 2024E PE, in line with its peers'average on Wind consensus. Our target price is RMB38.39. BUY. Key data 2Q24: domestic demand on the mend; overseas expansion sustainedothers changed by +8.8/-26.5/-12.8/+30.8% yoy to RMB5.12/0.59/0.2/1.24bn, withFor 1H24, revenue from yeast and deep processing products/sugar/packaging/yoy changes of +12.2/-40.1/-17.1/+46.4% for 2Q24, By product, small-packegeproduct performance shone, mainly owing to the low base and a moderaterebound in household consumption amid diverging consumption trends in 2024;YE continued to grow fast, underpinned by robust demand from internationalclients; Angel Nutritech saw reduced losses in 2Q24 as it focused on key products;the company gradually divested its sugar business. Sourcc: Wind 2Q24 GPM rose yoy: bullish on sustained profit margin rally The 1H24 GPM dipped 0.3pp yoy to 24.3%, while that for 2Q24 rose 0.3pp yoy to23.9%, which we attribute to faster revenue growth for the high-marginsmall-package product over the overall business, as well as falling hydrolyzedsugar costs. With declining molasses prices at home and abroad, we see reducedratios rose 0.1/0/0.4pp yoy to 5.2/3.4/0.2% (2Q24: +0.6/-0.3/+0.6pp yoy to+5.5/+3.1/-0.1%). Bullishonsustainedoperationrecoveryinthefuture;maintainBUY Upbeat on a demand rally at home, increased market share after the capacityramp-up abroad, as well as the bocst from the equity incentive plan, we lift ourearnings forecasts,and project 2024/2025/2026 EPS at RMB1.60/1.80/2.07(previous: RMB1.53/1.70/1.96). Our target price is RMB38.39. BUY. Risks: fluctuations IIn raw-material prices; soft macroeconomic performance;food-safety issues. Full financials Disclaimers Analyst Certification IWe, GONG Yuanyue, hereby certify that the views expressed in this report accurately reflect the personal views of theanalyst(s) about the subject securities or issuers; and no part of the compensation of the analyst(s) was, is, or will be, directly orindirecty, related to the inclusion of specific recommendations or views in this report. General Disclaimers and Disclosures This report is based on information deemed reliable and publicly available by HFHL, but HFHL and its assoclated company(les)(collectively, hereinafter “Huatai") makes no guarantee as to the accuracy or completeness of such information. The opinions, assessments and projections contained herein only reflect the views and judgments at the issuance date. Huataitimes. The prices, values and investment returns of the securities or investment instruments referred to herein may fiuctuate.modified without notice by Huatal, and investors shall pay attention to such updates or modifications when necessary. HFHL is not a U.S. Financial Industry Regulatory Authority ('FINRA') member firm, and HFHL research analysts are notregistered/qualified as research analysts with FINRA the purchase or sale of any security or financial instrument and in any jurisdiction where such offer or solicitation would be llegal.conclusions and recommendations in this report are for reference only and are not to be construed as an offer or solicitation forSuch views and recommendations are not intended to provide personal investment advice and does not take into account thespecific investment objectives, financial situation and the particular needs of any specific person. Investors should give sufficientconsideration to their own particular circumstances, and fully understand and use the contents of this report, which should not beseen as the sole factor to rely on in making investment decisions. Huatai and the report's authors shall under no circumstance beheld liable for any direct, indirect or consequential losses or damages arising from or in connection with the use or reliance of thisreport or its contents. Any form of written or verbal commitment to share the proceeds or losses of any securities investment shal