\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 887 Inner Mongolia Yili Industrial Group Co.Ltd(600887) )
Event overview: on March 10, the company released the main business conditions from January to February 2022. During this period, the company achieved a total operating revenue of about 21.5 billion yuan, more than 15% year-on-year, and a total profit of about 3.3 billion yuan, more than 20% year-on-year. It successfully ushered in a “good start”.
The industry demand rose against the market, and the high milk price promoted the improvement of the downstream competitive margin. In 2021, the social zero was + 12.5% year-on-year, and the two-year average was + 3.9%. The overall market demand is still relatively weak. The sales volume of dairy products was + 8.4% year-on-year, and the sales volume was + 5.1% year-on-year, maintaining the trend of simultaneous rise in volume and price. The epidemic has made consumers more aware of the nutritional value of dairy products and promoted the demand for white milk. In 2021, the average price of raw milk was 4.3 yuan / kg, a year-on-year increase of + 13.4%. The high milk price slowed down the downstream competitive margin, and the industry as a whole ushered in the trend of increasing net interest rate.
Liquid milk continues to move towards high-end development and further expand the advantages of milk powder market together with Aoyou. From January to February, the company’s liquid milk, milk powder and dairy products, cold drinks and other businesses achieved good growth. Driven by the demand for gifts during the Spring Festival and Olympic marketing, the proportion of high-end products such as Jindian, anmushi, jinlingguan and children’s cheese stick was + 3PCT year-on-year, and the overall product structure was further inclined to high-end. Among them, Jindian was + 15.1% year-on-year in January, with the growth rate ranking first in the same category. While the traditional advantageous categories continue to develop rapidly, the company actively expands the business of milk powder and cheese. From January to February, jinlingguan’s revenue was more than + 30% year-on-year. After the acquisition of Aoyou, it will coordinate the development of sheep milk powder and high-end milk powder, synchronously layout the medium and high-end and ultra-high-end infant formula market, and further realize the breakthrough of milk powder business. In the future, based on the independent operation of the team, we will deepen the coordination and complementarity of milk source layout, product R & D, channel construction and other aspects. At the same time, the cheese business doubled year-on-year from January to February. In grasping the high growth track of cheese, based on intensive offline network and strong brand strength, it is expected to occupy a place in the cheese market.
Continue to strengthen the upstream layout, slow down the competition, and benefit the balanced development of income and profit. The company actively deployed upstream animal husbandry to ensure the stability and high quality of raw milk supply under the background of raw milk shortage. Since the merger and acquisition of Youran animal husbandry and Zhongdi dairy, the company has acquired westlanddairy overseas to further improve the self-sufficiency rate of raw milk. It is expected that the overall price of raw milk will remain high in 2022, and the downstream competition will remain relaxed, which is conducive to the balanced development of the company’s income and profit. In addition to the cost investment, the future competition will also focus on the comprehensive level competition such as channel layout, raw milk resources, product structure and operation efficiency. Yili is expected to maintain the long-term logic of improving profitability. In the long run, the net interest rate is expected to rise to a steady-state level of 9% – 10%.
Investment suggestion: it is estimated that the company will realize revenue of 110643/124474/139535 billion yuan from 2021 to 2023, a year-on-year increase of + 14.2% / + 12.5% / + 12.1%; The net profit attributable to the parent company was 9.050/10.702/12.339 billion yuan, a year-on-year increase of + 27.9% / + 18.3% / + 15.3%, EPS was 1.41/1.67/1.93 yuan respectively, and the corresponding PE was 26x / 22x / 19x respectively. The company’s valuation is slightly lower than the expected valuation of the dairy sector in 2022, about 23x (wind consensus expectation, arithmetic average method). Considering that Yili, as a leading enterprise, has sufficient advantages in channel layout and brand cognition, with the improvement of high-end product structure and the rapid development of milk powder and cheese business, the scale is expected to continue to grow rapidly, benefiting from the slowing down of downstream competitive margin and the improvement of gross sales difference, it is expected to drive the improvement of overall profitability and maintain the “recommended” rating.
Risk tip: industry competition intensifies, market demand is less than expected, food safety problems, etc.
