Qianhe Condiment And Food Co.Ltd(603027) (603027)
Zero added soy sauce: both healthy and high-end, the blue ocean in condiments. With category substitution and fission, there is still room for improvement in the total amount of soy sauce industry. Its b-end is easy to defend and difficult to attack, and its C-end is more than one super strong. Therefore, brand enterprises are making efforts to differentiate. Under the trend of high-end and healthy, zero added soy sauce came into being. It is estimated that under the neutral assumption, the market scale CAGR is about 37.5% in five years, with a space of 4.89 billion yuan, fast growth and large space. It is still in the blue ocean market.
Caramel color start, full of motivation, wolf nature. Qianhe Condiment And Food Co.Ltd(603027) started out as caramel, then focused on the soy sauce track, initiated zero addition in the industry, and launched equity incentive to stimulate business vitality by relying on the product strategy of “zero addition first, supplemented by high freshness”, experienced management and the rapid development of strong executive corporate culture. Since 2016, the revenue growth rate has ranked first in the industry.
Excellent quality + leading positioning, stand out from regional brands. Products: look forward to consumption upgrading and early card position high-end, select the zero addition category ignored by the leader in high-end soy sauce, obtain differentiated competitive advantage, seek to break the situation, and provide high-quality guarantee with high amino acid nitrogen in the same category. Brand: the packaging is bright and intuitive, hold high and fight high as a brand, seize the minds of consumers, and add the first brand with zero sword finger. Channel: create high channel profits with low cost / strong product power / high pricing, improve dealers’ enthusiasm to promote zero addition, and obtain stronger channel thrust.
Future space: capacity planning and regional expansion are synchronized to help nationalization. Since its listing, Qianhe has expanded its production three times on a large scale, with a five-year capacity CAGR of about 20%, laying the foundation for rapid development. Regional expansion: Qianhe has an all channel and all product layout in the western base camp, and there is still room to sink the market; The foreign markets are operating step by step, the county-level channels in Jiangsu, Zhejiang and Shanghai are sinking in the East, the dealers are continuously developed in the middle by Prefecture and prefecture, the dual channel layout of business supermarket + circulation pilot is relied on in the north, and the south is cultivated for a long time as a strategic market. Channel expansion: with the decline of business super customer flow, Qianhe has gradually developed new channels after standing firm in Ka channel. As a potential market, BC store channel has realized curve overtaking in online channels. The new retail channel has been focused on operation, and the catering channel has carried out strategic layout. Product strategy: Launch cost-effective zero addition soy sauce, improve the product matrix and help the rise of circulation channels. We estimate that the main revenue of Qianhe will exceed 4.7 billion yuan in 2025, and the CAGR will be 23.4% from 2020 to 2025, which matches the capacity planning + product structure upgrading.
Long term: pilot zero addition, multi category expansion. We believe that Qianhe has the brand power to become the pronoun of “zero addition”, and develops zero addition vinegar, zero addition cooking wine and other zero addition condiments with zero addition soy sauce as the fulcrum to form the product power and channel power of zero addition multi category matrix. With the continuous improvement of consumer education and brand awareness, zero addition multi category matrix is expected to bring stronger growth momentum to Qianhe and achieve high growth.
Investment suggestion: we estimate that the revenue from 2021 to 2023 will be RMB 1.935/2.405/3.068 billion, the net profit will be RMB 222/3.30/439 million, and the EPS will be RMB 0.28/0.41/0.55. With reference to comparable companies, considering that zero addition is in line with the consumption upgrading trend and Qianhe has considerable room for nationalization, it is given 73 times PE in 2022, corresponding to the target price of 30.11 yuan, maintaining the rating of “overweight-a”.
Risk tip: the growth rate of zero addition products is lower than expected, the rising expenses in the expansion period put pressure on profits, and the regional expansion rate is lower than expected
