Daodaoquan Grain And Oil Co.Ltd(002852) (002852)
Main points:
The company is the leader in the subdivided field of rapeseed oil in China
The company is a comprehensive oil processing enterprise integrating the production, scientific research, trade, storage and logistics of edible vegetable oil and its related by-products. It is the first listed company in China with rapeseed oil processing as its main business. From 2012 to 2020, the company’s revenue increased from 2.271 billion yuan to 5.287 billion yuan, with an annual compound growth rate of 11.14%; From 2012 to 2018, the net profit attributable to the parent company showed a rapid growth trend, with an average annual compound growth rate of 47.92%. From 2019 to 2020, the net profit attributable to the parent company decreased significantly due to the rise of raw material prices and the epidemic situation. With the slow rise of raw material prices and the gradual implementation of the company’s price increase measures, the company’s operation has gradually improved. In the first three quarters of 2021, the company achieved a revenue of 3.577 billion yuan, a year-on-year decrease of 6.19%, and the net profit attributable to the parent company was 94 million yuan, a year-on-year increase of 4.26%.
The edible vegetable oil market is growing steadily, and the market share of rapeseed oil is expected to focus on the leading
After more than 30 years of development, China’s edible vegetable oil industry has entered a stable period. The industry is mainly stock competition, and the oil product structure is constantly changing. Specifically, with the upgrading of consumption structure and stricter supervision of the food industry, small packaging and medium packaging oil replace bulk oil in the household and catering markets respectively. In terms of categories, the market share of high-end oil of small products continues to increase, which has a certain development potential. China is the largest producer and consumer of rapeseed oil in the world, with a large market and steady growth in consumption. From 2011 to 2020, the compound annual growth rate of rapeseed consumption in China was 2.62%. At the present stage, the concentration of China’s rapeseed oil processing industry is low, and there are many small and medium-sized enterprises in the market. In recent years, the price of raw materials has risen sharply, the profit space of small and medium-sized enterprises and small workshops has been greatly compressed, or will be eliminated by the market, and the vacated space will be occupied by leading enterprises, and the trend of improving the industry concentration will continue.
The price of raw materials went down & capacity expanded, and the growth path of the company was clear
On the one hand, due to the time lag effect of price adjustment, when the price of raw materials rises, the company’s cost increases, and the price transmission takes about 2-3 months. In the short term, the cost increase can not be transferred to the consumer terminal in time, resulting in pressure on the company’s profits. We judge that the cost of raw materials may enter a downward channel in 2022, and the time lag effect will amplify the company’s profitability and gradually release the profit elasticity. On the other hand, the company has gradually improved its production capacity layout in recent years. The formal operation of Maoming and Jingjiang projects will greatly alleviate the bottleneck of the company’s insufficient production capacity. At the same time, the company actively develops high value-added products such as high oleic acid grease and tea oil, which is expected to continue to contribute new profit increments to the company in the future with the continuous development of new products.
Investment advice
The decline in raw material prices will boost the company’s profitability. Capacity expansion and high-end oil products are expected to open up the company’s growth space. We expect that from 2021 to 2023, the company’s operating revenue will be RMB 48.75/55.18/6.252 billion respectively, the net profit attributable to the parent company will be RMB 135/192/288 million respectively, the corresponding EPS will be RMB 0.37/0.54/0.80 respectively, and the corresponding PE of the current stock price will be 43 / 30 / 20x respectively. It will be covered for the first time and given a “buy” rating.
Risk statement
The risk of raw material price fluctuation, the risk of intensified market competition, the risk of hedging, and the risk that the production capacity is lower than expected.
