China Securities Co.,Ltd.: Structural recovery in the chemical raw materials industry; formula upgrades and refined feed support long-term demand

China Securities Co.,Ltd. released a research report stating that in September, the average monthly price of VD3 rose 25.39%, maltol prices recovered, acesulfame potassium operating rates rebounded and inventories were drawn down; sucralose inventories increased slightly, while the overall vitamin index continued to decline. Hog farming remains loss-making, putting pressure on upstream feed additive demand. Overall, the industry has opportunities for structural recovery, and earnings of leading companies are expected to improve gradually. The sugar-reduction trend, flavor upgrades, and refined feed are expected to continue driving demand and support the industry's medium- to long-term development. China Securities Co.,Ltd.'s main views are as follows: Deepening sugar-reduction trend, expanding application demand In the medium to long term, sugar reduction and healthy consumption are expected to continue driving industry demand. Application scenarios for low-sugar and sugar-free foods are constantly expanding, which is expected to drive demand for sweeteners and functional sugar alcohols. Food flavor upgrades are conducive to demand release for products such as maltol. Nutritional fortification provides growth space for vitamins. The refinement of feed and the promotion of low-protein diets are expected to increase demand for amino acids. Diversified applications jointly support the industry's long-term growth. September maltol price increases and acesulfame potassium destocking The average monthly prices of methyl and ethyl maltol rose 4.08% and 2.39% MoM; the average prices of acesulfame potassium and sucralose were flat, with divergent YoY directions. As of September 25, acesulfame potassium inventories fell 7.36% from August 28, while sucralose increased 1.45%. The prosperity of flavor additives has recovered somewhat, while sucralose's upward movement remains constrained by inventories. VD3 led gains in September with divergent performance From September 124, the average monthly prices of VD3 and VE rose 25.39% and 7.46%, respectively. Among 12 key vitamins, 7 still saw average price declines, and the overall index fell 6.65%. The average price of methionine fell 15.35% MoM, with recent quotes slightly higher; the latest VE price has retreated from end-August. The current recovery is mainly driven by individual product trends, and the basis for broad price increases remains weak. September farming losses constrain upstream demand The average profits in September for self-breeding and self-raising and for purchased piglets were approximately -199.53 and -99.36 yuan/head, respectively; the gross margins of the hog business of Muyuan and Wens for the first half of the year were -4.51% and -9.00%, respectively, and September selling prices fell about 20% YoY. Farming losses constrain restocking and stockpiling, while amino acid formula substitution still has structural demand, and upstream profitability may continue to diverge. Related industries and targets The food additive and sweetener industry has opportunities for structural recovery, and earnings of leading companies are expected to improve gradually. In the medium to long term, sugar-reduction formulas, flavor upgrades, and refined feed are expected to continue driving demand. In terms of sub-sectors, focus on vitamins, high-intensity sweeteners, and functional sugar alcohols, and select companies with advantages in technology, cost, and customers. Related companies include nutrition leader Zhejiang Nhu, sucralose leader Anhui Jinhe Industrial, integrated vitamin D3 leader Zhejiang Garden Biopharmaceutical, leading vitamin companies Zhejiang Medicine and JiangXi Tianxin Pharmaceutical, as well as erythritol elasticity target Shandong Sanyuan Biotechnology and functional sugar alcohol company Zhejiang Huakang Pharmaceutical, among others.