\u3000\u3 Bohai Water Industry Co.Ltd(000605) 499 Eastroc Beverage (Group) Co.Ltd(605499) )
Event overview
The company released its 2021 annual report, and realized a revenue of 6.98 billion yuan in 2021, a year-on-year increase of + 40.7%; The net profit attributable to the parent company was 1.19 billion yuan, a year-on-year increase of + 46.9%; Deduct the net profit not attributable to the parent company of RMB 1.08 billion, a year-on-year increase of + 34.7%. Among them, 4q21 revenue was 1.42 billion yuan, a year-on-year increase of + 54.9%; The net profit attributable to the parent company was 197 million yuan, a year-on-year increase of + 82.3%; Deduct 120 million yuan of net profit not attributable to parent company.
Analysis and judgment:
Quickly gain market share in the growth track
Eastroc Beverage (Group) Co.Ltd(605499) currently in a period of rapid growth, the company’s revenue in 2021 was + 40.7% year-on-year. On the one hand, the rapid income growth is due to the growth of China’s energy beverage market itself, with a year-on-year increase of + 10.8% in 2021; On the other hand, Dongpeng seized the industry opportunity to expand rapidly, and its sales share increased from 20.2% to 23.4%. Nielsen data show that red bull’s retail sales have entered a year-on-year downward trend since 2h21; The physical energy and sales performance of competitive products are also weaker than that of the industry as a whole; Dongpeng stands out among the top brands of energy drinks. In 2022, the company set a business target of revenue growth of no less than + 15% year-on-year, and gave guidance on future revenue growth for the first time. Based on the industry structure and company fundamentals, we expect the company to achieve higher income growth.
Systematic capacity improvement to promote nationalization
1) in terms of capacity supply, the supply capacity of main products is improved and more guaranteed. For example, in 2021, the capacity utilization rate of bottling line is 72%, in 2020, the capacity utilization rates of 500ml golden bottle special drink and 250ml golden bottle special drink production lines are 89% and 77% respectively. In 2021, the revenue is 5.02 billion yuan (year-on-year + 62.8%, accounting for 72%) and 850 million yuan (year-on-year + 3.3%, accounting for 12%) respectively. The capacity shortage of non main products improved. For example, the capacity utilization rate of 250ml BRICs special drink production line was 109% in 2020 and 76% in 2021. The capacity growth comes from the capacity release after the South China base is put into operation in July 2020 and the Chongqing base is put into operation in May 2021. At present, the company has built and put into operation seven production bases, and the construction of two production bases is in progress. It is expected that the product supply will be better guaranteed and the transportation cost will be optimized in the future.
2) in terms of sales network expansion, the company has accelerated the speed of channel expansion. At the end of 2021, the number of dealers reached 2312, which was + 45% compared with the end of last year (22% eliminated and 66% increased); The number of terminal outlets nationwide reached 2.09 million (vs Red Bull outlets exceeded 4 million), up from + 74% at the end of last year. At the same time, the company also strengthened the incentive and empowerment of sales channels. By the end of 2021, the rebate and discount payable for channel sales was 770 million yuan, accounting for 11% of the annual revenue (year-on-year + 1.7 PCT); In 2021, the channel promotion fee was 280 million yuan, a year-on-year increase of + 125%, mainly due to the company’s increase of 134 million yuan in freezers and other expenses. At the regional level, the nationwide expansion is irresistible. In 2021, the income of Guangdong, the base camp, was + 29.7% year-on-year, accounting for 46%; The revenue of regions outside Guangdong (except e-commerce and direct channels) increased by + 53.6% year-on-year, of which the growth rate of East China and southwest China was higher than that of the whole.
3) in terms of brand marketing, Dongpeng has been relatively conservative in the overall cost of advertising in the past two years, accounting for only 5.3% (year-on-year -0.4pct) of revenue in 2021. The increase is mainly due to the 120 million yuan of ad hoc communication invited by stars after listing. Under the situation that red bull, the main competitive product, is still in the dispute over trademarks, we judge that Dongpeng can still obtain a relative increase in brand voice through relatively conservative cost investment. Compared with online communication, the company pays more attention to the investment of offline channel promotion expenses, and the proportion of revenue is increasing year by year. We judge that the distribution and display of Dongpeng products are more important than brand communication at this stage.
In December 2020, Dongpeng plans to launch 5ml espresso drinks and 250ml espresso cans, and Dongpeng espresso drinks and Miaoli espresso drinks will be launched in December 2020. Although we expect that new products need a certain cultivation period, the short-term contribution to the total revenue is small, mainly in the mature market; However, compared with competing products, it provides a richer choice of products and helps to quickly expand the consumer population and consumption scene by taking advantage of the rapid increase of the influence of the main brand.
5) the improvement of Dongpeng’s digital ability is also worthy of attention. The company said that the digital tracking of goods circulation has been upgraded from “four code correlation” to “five code correlation”, which we believe will further consolidate the company’s competitive advantage. For example, the promotion of “one yuan Lexiang” has a good driving force for consumers’ consumption and dealer customers’ operation of Dongpeng, and beverages belong to FMCG, An efficient digital system will give better play to the incentive role of promotional activities.
Profitability remained stable
Due to the non recurring profit and loss of 120 million yuan from financial products and private equity investment funds, we observe the profitability of Dongpeng’s main business from the perspective of deducting non net profit. The non net interest rate deducted in 2021 was 15.5%, with a year-on-year increase of -0.7pct, which was relatively stable from 2019 to 20213. In 2021, the gross profit margin was + 0.74pct year-on-year, and the rise in the market price of PET bottle raw material polyester chip did not bother the company. Because the company locked the price in advance, the average purchase price was – 12% year-on-year. Based on this, we calculated that the actual average purchase price of polyester chip in 2021 was about 6000 yuan / ton. Since the end of last year, the market price of polyester chips has fluctuated between 6 Jiangnan Mould & Plastic Technology Co.Ltd(000700) 0 yuan / ton, accounting for about 30% of the cost. We believe that the material cost side of the company is still expected to be well controlled in 2022. In 2021, the company’s sales expense ratio was + 1.6pct year-on-year, mainly due to the increase of channel promotion fee and listing project promotion fee. The project cost is a short-term impact. Excluding this impact, the cost-effectiveness ratio shows an upward trend.
Investment advice
In 2021, Eastroc Beverage (Group) Co.Ltd(605499) achieved comprehensive and systematic capability improvement in capacity layout, sales network expansion, brand marketing, digital capability, etc., supporting the company to rapidly promote nationalization, achieve rapid growth higher than the industry, and maintain stable profitability. We expect Dongpeng to maintain rapid growth in 2022, raise the revenue forecast for 202223 from RMB 8.48/10.4 billion to RMB 8.77/10.78 billion, and the net profit attributable to the parent from RMB 1.44/1.78 billion to RMB 1.51/1.87 billion, and introduce the predicted revenue of RMB 13.05 billion and the net profit attributable to the parent of RMB 2.27 billion in 2024. In 202224, EPS was 3.78/4.68/5.68 yuan respectively, and the closing price of 2022 / 3 / 7 was 156.5 yuan, corresponding to 41 / 33 / 28 times of P / E in 202224, maintaining the overweight rating.
Risk tips
① the price of raw materials has risen sharply; ② Intensified market competition; ③ Food safety issues.
