Key investment points
Weekly News Express
Industry news: 1) in 2021, the cumulative import volume of alcohol was US $5.49 billion (+ 32%); The cumulative import volume was 1.94 billion liters (+ 59.2%); 2) Suqian’s 21 year regulation of liquor enterprises realized 38 billion 644 million yuan (+33.98%), of which Baijiu liquor production value was 37 billion 818 million yuan (+33.88%); The output value of beer industry is 826 million yuan (+ 38.59%).
Company news: 1) Luzhou Laojiao Co.Ltd(000568) : Liu Miao takes over the post of party secretary and chairman of the group. Luzhou Laojiao Co.Ltd(000568) postdoctoral workstation science and innovation company with a registered capital of 100 million yuan invested in 51%; 2) Shede Spirits Co.Ltd(600702) : “Chongqing campaign” is currently in the pilot stage; We will continue to follow the strategy of “focusing on Sichuan, Hebei, Shandong and Henan, improving northeast and northwest, and breaking through East and South China”.
Key information feedback this week
1. This week, we released an in-depth report on the condiment industry: “condiment depth of the food and beverage industry: the prosperity of the industry still exists, when the sub circuit is digging for gold”
(1) the condiment industry has a large space, and the concentration still has room to improve. The revenue of China’s condiment industry increased from 259.5 billion yuan in 2014 to 395 billion yuan in 2020, with a six-year CAGR of 7.3%. It is expected that the sales will reach 550 billion yuan in 2025. Among them, soy sauce, as the largest category, the retail sales increased from 41.1 billion yuan in 2012 to 87.4 billion yuan in 2020, and the CAGR in 8 years was 9.9%; In 2020, the market scale or retail sales of vinegar, compound condiment, packaged mustard and oil consumption will be 18 billion yuan, 144 billion yuan, 7.2 billion yuan and 6.5 billion yuan respectively. The concentration of condiment industry is low, with CR3 accounting for 14%, which is far lower than that of South Korea, Japan and the United States, accounting for 32%, 18% and 15% respectively. There is still room to improve the industry concentration. Among them, Foshan Haitian Flavouring And Food Company Ltd(603288) City, the industry leader, accounts for only 7%, and the market share of leading enterprises in the industry is expected to further increase.
(2) soy sauce is at the end of its growth stage and its production capacity continues to expand. The condiment industry has many categories, and the main categories such as soy sauce, vinegar and oyster sauce are in the growth stage, but soy sauce has gradually moved towards maturity at the end of the growth stage. The output and average price of soy sauce in 2020 were 13.44 million tons and 6505 yuan / ton, and the CAGR in recent five years was 5.8% and 2.5%. From the perspective of production capacity pattern, Haitian has a production capacity of 4 million tons and a long-term plan of 4.5 million tons Qianhe Condiment And Food Co.Ltd(603027) , Jonjee Hi-Tech Industrial And Commercial Holding Co.Ltd(600872) , Jiajia Food Group Co.Ltd(002650) , Jiangsu Hengshun Vinegar-Industry Co.Ltd(600305) total capacity is about 558000 tons, 703000 tons, 305000 tons and 252000 tons respectively, of which Qianhe, Jonjee Hi-Tech Industrial And Commercial Holding Co.Ltd(600872) planned capacity exceeds 1 million tons, and the capacity advantage will form a scale advantage in the competition.
(3) functional diversification is the trend, and the C-end channel is expected to continue to develop. With the continuous recovery of catering, the C-end has made steady efforts, and the proportion of family channels has increased from 25% to 30%. With the implementation of price increases in the superimposed industry, the condiment industry is expected to achieve both volume and price increases in 2022. From the perspective of channel layout, Foshan Haitian Flavouring And Food Company Ltd(603288) catering channel has great advantages and takes the lead in realizing nationalization Qianhe Condiment And Food Co.Ltd(603027) , Jiangsu Hengshun Vinegar-Industry Co.Ltd(600305) , Jonjee Hi-Tech Industrial And Commercial Holding Co.Ltd(600872) force C end, family channel accounts for more than 80%, which is dominant in some regions. In terms of emerging channels, some enterprises actively embrace community group buying, which is expected to become one of the important channels in the industry in the future. From the perspective of future trend, structural upgrading will be the main line of the industry. The CAGR of high-end soy sauce from 2014 to 2020 will reach 11%, higher than the average growth rate of the industry; Functional diversification is the general trend; Accelerating the development of compound condiments is the direction. From 2011 to 2020, the CAGR was 14.3%, higher than the growth rate of the industry; Condiment enterprises should actively focus on the above trends to seek breakthroughs.
Investment strategy: Based on the rigid demand of condiments in catering and family, the industry has a long life cycle, the market scale and market concentration are expected to continue to improve, and the volume and price of each subdivided field are expected to rise. Product scale, differentiation, health, compound and high-end will be the future development trend. It’s recommended to focus on industry leading enterprises or the strong category in a subdivision category, as well as to focus on specific segments and bind categories to achieve regional brands that can overtakat corners by focusing on Foshan Haitian Flavouring And Food Company Ltd(603288) \ and Yihai Kerry Arawana Holdings Co.Ltd(300999) etc.
2. This week, we also released Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) in-depth report: Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) ( Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) ): the leader of milk drinks is rejuvenated and the nationalization is accelerating
(1) milk beverage leader, with 4-year performance CAGR exceeding 20%. Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) , headquartered in Jinhua, Zhejiang Province, was established on October 22, 1994 and listed on the Shanghai Stock Exchange on February 8, 2021. From 2016 to 2020, the total revenue of the company increased from 453 million yuan to 1088 million yuan, and the four-year CAGR was 24.47%; The net profit attributable to the parent company increased from 102 million yuan to 215 million yuan, and the four-year CAGR was 20.30%. According to the latest data, the revenue in 2021 was 1.47 billion yuan, an increase of 35.14% at the same time; The net profit attributable to the parent company was 262 million yuan, an increase of 22.31% at the same time.
(2) the industry has a high outlook, and it is possible to create another large single product. 1) Demand side: the retail market scale of milk beverage increased from 85.028 billion yuan in 2014 to 136182 billion yuan in 2019, and the five-year CAGR was 9.88%. Considering the epidemic situation in 2020 and the subsequent recovery, we expect the retail market to be 226.3 billion yuan in 2025; The retail market scale of the beverage industry increased from 465216 billion yuan in 2014 to 578.56 billion yuan in 2019, and the five-year CAGR was 4.46%. Considering the epidemic situation in 2020 and the subsequent recovery, we predict that the retail market will increase to 805.2 billion yuan in 2025. China’s demand for dairy drinks increased from 9.5208 million tons in 2013 to 173939 million tons in 2019, with a six-year CAGR of 10.57%. Considering the epidemic situation in 2020 and the subsequent recovery, we expect that the demand will increase to 27.72 million tons in 2025. 2) Supply side: the output of milk beverage increased from 132494 million tons in 2015 to 173944 million tons in 2019, and the CAGR in four years was 7.04%; The output of the beverage industry increased from 176.61 million tons in 2015 to 177635 million tons in 2019, and the four-year CAGR was 0.14%.
We believe that milk containing beverages can meet the needs of consumers for taste and health at the same time, and the output of milk containing beverages is expected to maintain steady growth in the future. 3) Competition pattern: there is a rise in stability, and it is still possible to create another large single product. Cr5 increased from 33.84% in 2014 to 34.15% in 2018, and CR10 increased from 40.73% in 2014 to 42.26% in 2018. It is expected to rise steadily in the future. There have been billions or even billions of single products in the milk beverage market, such as AD calcium milk, nutrition express, wangzi milk, etc. we believe that enterprises with production capacity and channel advantages are still possible to create large single products.
(3) analyze the company from six angles, and the nationalization is accelerating. 1) Brand side: the company takes “new fresh Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) , naturally fall in love with you” as its brand appeal and concept; Take “young consumer groups and youth leisure, nutrition and convenience” as the brand market positioning; Win the favor of target groups aged 15-35 with sweet taste and excellent quality. 2) Product side: take sweet milk as the basic sector to push through the old and bring forth the new. New products such as fruit and vegetable drinks, milk coffee and coconut milk were launched in 2021. The sales of new products in that year was about 100 million yuan. It is expected that the sales of new products of the company will double in 2022. 3) Channel side: in recent five years, the proportion of distribution mode revenue has exceeded 95%. Direct selling is mainly carried out through e-commerce channels. It has successively cooperated with jd.com and tmall. The online sales increased from 5.68 million yuan in 2017 to 45.46 million yuan in 2020, and the CAGR in three years was 100%. In the past three years, the income of dealers who have cooperated for more than three years accounts for more than 60% of the distribution channels. 4) Regional expansion: the company takes East China, central China and southwest China as the core areas. In 2020, the revenue and proportion of East China, central China and southwest China were 612 million yuan (57%), 205 million yuan (19%) and 177 million yuan (16%) respectively. It sinks through channels and radiates to the surrounding areas. The compound growth rate of emerging regions is obvious. The CAGR of sales in South China, North China, northeast and northwest regions from 2017 to 2020 are 101%, 41%, 106% and 91% respectively. 5) Capacity side: the company has five production bases, including Zhejiang Jinhua, Zhejiang Longyou, Jiangxi Shanggao, Yunnan Qujing and Henan Hebi. In 2021, the company’s total production capacity will be about 300000 tons. Jiangxi and Longyou will expand their production capacity in phase II. It is expected that the company’s total production capacity will eventually reach 55 Shenzhen Zhongjin Lingnan Nonfemet Co.Ltd(000060) 0000 tons, which can meet the company’s national expansion needs in the next 2-3 years. 6) Cost side: the company takes milk powder as the main raw material, accounting for more than 50% of the total cost. Generally, the price of milk powder in the second year is locked half a year in advance. The price of raw milk has an obvious upward trend this year, and the price of the company’s products may be increased.
We are optimistic about the company’s continued large-scale new products and national expansion. It is expected that the EPS will be 1.21/1.56/1.94 yuan from 2021 to 2023, and the current share price corresponding to PE will be 28 / 21 / 17 times respectively, maintaining the “recommended” investment rating.
3. Information feedback of key companies this week:
Wuliangye Yibin Co.Ltd(000858) : 1) during the 14th Five Year Plan period, the group achieved the development goal of “5111”: first, it broke into the world’s top 500; Second, the main business of the wine industry has a sales revenue of more than 100 billion; Third, the sales revenue of diversified industries has exceeded 100 billion; Strive to build a world-class wine enterprise with excellent products, excellent brands, leading innovation and modern governance. The joint stock company has achieved the development goal of “2118”: first, the production capacity of raw wine has reached 200000 tons; Second, the storage capacity of base liquor reaches 1 million tons; Third, the sales revenue exceeded 100 billion; Fourth, the total profit reached 80 billion. 2) In 2022, the group aims to maintain a steady growth of more than double digits, and the joint-stock company will continue to maintain a growth rate higher than that of the group. 3) Actively respond to the five concerns of the market.
Zhongyin Babi Food Co.Ltd(605338) : 1) the capacity of the factory in Shanghai is saturated, the factory in Nanjing is under construction, and the factory in Wuhan will be built. 2) Considering the M & a project in Central China, there are more than 4000 stores in China. The expansion of stores in the future mainly depends on new opening and turnover, accounting for 50% respectively. 3) In 2021, single store revenue rebounded to the level of 2019, and East China exceeded 2019. 4) The number of new stores will exceed 700 in 2021 and 1000 in 2022. 5) Group meals are developing rapidly and will be upgraded to business division in 2022. It is expected that the proportion will increase from 15% in 2021 to 20%, and it is expected to maintain a growth rate of about 70%.
Shanghai Milkground Food Tech Co.Ltd(600882) : 1) from January to February 2022, the growth rate of cheese sticks was about 60%, and the revenue in March accounted for 40% of the first quarter; 2) The revenue target is more than 6 billion yuan, including 1 billion yuan of liquid milk and trading products and 5 billion yuan of cheese. The target net interest rate is about 8%. It will enter the performance release period in 2022. 3) Mengniu has become a war investment company for business integration, and the cheese business is handed over to the company to open up the supply chain and channels and support product promotion. 4) The revenue scale of Aishi Chenxi is about 1 billion yuan, which is expected to be injected into the company around April to further expand its production capacity.
Investment view
Baijiu: the main liquor companies such as Kweichow Moutai Co.Ltd(600519) , Shanxi Xinghuacun Fen Wine Factory Co.Ltd(600809) , Jiangsu King’S Luck Brewery Joint-Stock Co.Ltd(603369) and Jiugui Liquor Co.Ltd(000799) released monthly data for 1-2 months this week, effectively easing the market’s worries about whether the first quarter results of liquor companies can be a success. Wuliangye Yibin Co.Ltd(000858) and Luzhou Laojiao Co.Ltd(000568) both released the performance express of 2021. The overall trend of high-end liquor is good, and it will end smoothly in 2021. We look forward to a good start in the first quarter Wuliangye Yibin Co.Ltd(000858) this week because of the epidemic online communication, actively dialogue with the market, sincere communication to respond to the current concerns of the market, and further to the Baijiu sector rebound confidence, we optimistic about Baijiu sector continued to rebound.
Popular goods: at present, the popular goods sector is in a shock stage. Under the background of rising raw materials and weak demand, the market is worried about the performance of overvalued stocks. We suggest to actively pay attention to enterprises with undervalued and declining cost side, continue to pay attention to the transmission progress of beer and condiments price increase, and actively pay attention to the structural opportunities of leisure food.
On the whole, our view remains unchanged: at this stage Baijiu sector we recommend three high-end wine giants ( Kweichow Moutai Co.Ltd(600519) , Wuliangye Yibin Co.Ltd(000858) , Luzhou Laojiao Co.Ltd(000568) ), three high-end three swordsmen ( Shede Spirits Co.Ltd(600702) , Shanxi Xinghuacun Fen Wine Factory Co.Ltd(600809) , Jiugui Liquor Co.Ltd(000799) ), real estate wine, four gentlemen ( Anhui Kouzi Distillery Co.Ltd(603589) , Anhui Yingjia Distillery Co.Ltd(603198) , Jiangsu King’S Luck Brewery Joint-Stock Co.Ltd(603369) and Jiangsu Yanghe Brewery Joint-Stock Co.Ltd(002304) ). We recommend Juewei Food Co.Ltd(603517) , Chongqing Fuling Zhacai Group Co.Ltd(002507) , Tsingtao Brewery Company Limited(600600) , Chacha Food Company Limited(002557) , and continue to pay attention to structural opportunities in the food sector. Give the food and beverage industry an “overweight” rating.
Risk tips
Risk of epidemic fluctuation; Macroeconomic fluctuation risk; Recommend the risk that the company’s performance is less than expected; Industry competition risk; Food safety risks; Risk of changes in industrial policies; Consumption tax or production risk; Raw material price fluctuation risk.
