Ligao Foods Co.Ltd(300973) (300973)
Event: Ligao Foods Co.Ltd(300973) issued the announcement on price adjustment of some products. Since January 4, 2022, the ex factory prices of some main frozen baked foods and baked raw materials have been adjusted by 3% – 8%. Combined with the recent channel tracking of the company, our updated views are as follows:
Speed up the pace of price increase to cope with cost pressure. 1) The price increase is mainly aimed at egg tarts and cream products. Tarts are one of the core products of the company. It is estimated that the scale of tarts and tarts in 2021 will be about 400 million, accounting for about 15% of the company’s overall revenue and about 25% of the frozen baking business. Among them, the price of Hong Kong tarts with relatively low gross profit margin has been raised after November, and the price increase range is estimated to be about 5%. This price increase is estimated to be mainly aimed at Portuguese tarts with relatively high gross profit margin, and the pace of price increase is slightly faster than previously expected. The price increase of raw material business is mainly aimed at some cream products, and the revenue contribution in 21 years is relatively low. 2) The price increase is mainly to cope with the rising cost. The main raw materials purchased by the company are bulk Shenzhen Agricultural Products Group Co.Ltd(000061) such as oil, sugar and flour. The rising price of bulk raw materials has put some pressure on the cost of the company since 2021. Taking the oil and grease with a purchase amount accounting for about 20% as an example, the average price index of oil and grease commodities increased by 30% year-on-year from the beginning of 2021 to November. Since the second half of the year, the company has successively implemented price raising measures for some categories, and the cost pressure is expected to be relieved.
It is expected that the smooth transmission of price increase is highly likely. The main reasons are as follows: 1) the company will ensure the profit of dealers while raising the price. The channel feedback has raised the gross profit margin of dealers by 25%, and has close cooperation with the company and strong stickiness. It is expected that the price increase will not damage the enthusiasm of channels. 2) The upstream cost of baking has increased as a whole, and relevant enterprises have also introduced price increase measures. For example, Shanghai Hi-Road Food Technology Co.Ltd(300915) announced that the ex factory price of some products will be increased by 5-8% from March 2022, and the price has also been adjusted in Namchow Food Group( Shanghai) Co.Ltd(605339) 21. 3) The frozen baking industry is in a high-speed growth period of rapid demand expansion. Aokun has certain advantages in product power, especially in Xiaob canal. At present, the coverage of price increase categories of the company is not high and the price increase range is small. It is estimated that the contribution to revenue is limited. The implementation of price increase is expected to promote the improvement of gross profit margin in 22 years. If the subsequent price pressure of raw materials is gradually relieved, the profit elasticity is expected to be gradually released.
The capacity landing in 22 years is expected to ensure scale expansion. It is estimated that the revenue of Okun will increase by 60% in 21 years, and frozen baking will still be the main growth driver in 22 years. Recently, a new doughnut production line has been put into operation in Henan factory, and the follow-up Portuguese tart and frozen cake production lines are expected to operate successively. The Zhejiang factory will be laid out in the first half of 22 years, and the Guangdong factory can also supplement a certain capacity. Comprehensively, the output value increment in 22 years is expected to reach 1 billion. While meeting the needs of super customers such as Sam, it can also increase the product supply to bakeries and catering channels. Although the current market pattern of frozen baking is relatively scattered (about 10% of Okun city in 2020), considering the high production capacity investment efficiency of the company and the relatively prominent product power and sales service capacity, it is estimated that the company can continue to enjoy market dividends in the next two or three years.
Profit forecast, valuation and rating: maintain the net profit forecast of 274 / 347 / 446 million for 21-23 years, corresponding to EPS of RMB 1.62/2.05/2.64, and the corresponding P / E of the current stock price is 79 / 62 / 49 times, maintaining the “buy” rating.
Risk tips: food safety risk, raw material price fluctuation risk, and intensified market competition risk.
