\u3000\u3000 Qianhe Condiment And Food Co.Ltd(603027) (603027)
Events
On the evening of February 23, 2022, the company issued the restricted stock incentive plan and the plan for non-public offering of a shares: (1) the raised funds of this non-public offering of shares are RMB 500-800 million. After deducting the issuance expenses, all the raised funds will be used for the “intelligent manufacturing project of seasoning with an annual output of 600000 tons”. (2) The incentive plan intends to grant 4.59 million restricted shares to 73 members of the company’s directors, senior managers, middle managers and core backbone.
Key investment points
The fixed increase shows the confidence of major shareholders and invests in the seasoning project with an annual output of 600000 tons
The company plans to invest 1.26 billion yuan, of which 500-800 million yuan is planned to be raised. After deducting the issuance expenses, all of it will be used to build the “intelligent manufacturing project of seasoning with an annual output of 600000 tons”. The project has invested a total of 295 million yuan, and the fixed increase will be fully subscribed by Mr. Wu Chaoqun, the controlling shareholder and actual controller of the company. The issue price is 15.59 yuan / share, corresponding to 32-51 million additional shares, accounting for 4.0% – 6.4% of the total share capital before issuance.
The construction period of the project is five years. From 2020 to 2024, it will be constructed in two phases. The first phase will complete the construction of 200000 tons of soy sauce and 100000 tons of cooking wine production line, and the second phase will complete the construction of 300000 tons of soy sauce production line. After the completion of the construction, the annual production capacity of 500000 tons of brewing soy sauce and 100000 tons of cooking wine will be added. At that time, the total production capacity of the company will exceed 1.1 million tons, which can effectively ensure the long-term and stable development of the company.
The implementation of equity incentive plan shows the confidence and determination of the company
The company granted 4.59 million restricted shares to 73 objects such as directors, supervisors and core backbones, including director Andy Lau, vice president Xu Yi, chief financial officer he Tiankui, board secretary LV Kelin, etc. The performance assessment requirements of the equity incentive are: Based on the company’s revenue in 2021, the revenue in 2022-2024 will increase by 18%, 38% and 60% respectively compared with that in 2021, or based on the company’s net profit in 2021, the net profit in 2022-2024 will increase by 50%, 90% and 130% respectively compared with that in 2021. According to the grant price of restricted shares of 9.79 yuan / share and the closing price of 19.66 yuan / share the day before the announcement, it is very attractive. We believe that the implementation of the equity incentive plan is expected to further stimulate the enthusiasm and business vitality of the company’s employees, and achieve phased development goals and medium and long-term strategic planning.
Product channels work together and are expected to enjoy price increase dividends this year
Facing the sluggish demand of the industry and various pressures, the company actively adjusted. In terms of products, the introduction of high-end products, enzyme soy sauce, continued to consolidate Qianhe’s brand image in the high-end. At the same time, it made efforts to make high fresh soy sauce and cheap zero addition soy sauce, focusing on cost performance, so as to further expand the coverage of consumer groups. In terms of channels, the company actively adjusted the channel structure, actively cooperated with community group buying and launched cooperative products, increased the cost investment, consolidated the advantages of traditional channels such as C-end Ka market and farmers’ market, and strengthened the layout of catering end. In terms of market, expand foreign markets in a differentiated way, establish brand image by entering large Ka, cultivate market and expand sales revenue through online channels. In terms of price, with the arrival of the price increase cycle of the industry, the company adjusted the ex factory price of some low gross profit products, and the price increase of each product ranges from 3% to 7%. At present, the price increase is progressing smoothly, and it is expected to complete the terminal price increase in the second quarter of this year.
Looking forward to 2022, we believe that the industry demand may be improved. In 2021, the overall base of the company is low, and the rise range of raw materials may be narrowed or even the price may fall, so the profitability is expected to be improved.
Profit forecast
We are optimistic about the company’s differentiation strategy of focusing on high-end zero addition, and the overall positive trend remains unchanged. Based on prudence considerations, we do not consider the impact of additional issuance on the company’s performance and share capital for the time being. It is estimated that the EPS from 2021 to 2023 will be 0.32/0.50/0.64 yuan, and the current share price corresponding to PE will be 61, 40 and 31 times respectively. It will be covered for the first time and given a “recommended” investment rating.
Risk tips
Macroeconomic downside risks, consumption dragged down by the epidemic, intensified industrial competition, less than expected regional expansion, less than expected new product promotion, less than expected price increase, less than expected progress in additional issuance, etc.
