\u3000\u3 Shengda Resources Co.Ltd(000603) 288 Foshan Haitian Flavouring And Food Company Ltd(603288) )
Matters:
The company released the financial report for 2021 and achieved an operating revenue of 25.004 billion yuan, a year-on-year increase of 9.71%; The net profit attributable to the parent company was 6.671 billion yuan, a year-on-year increase of 4.18%. Among them, 2021q4 achieved an operating revenue of 7.010 billion yuan, a year-on-year increase of 22.85%; The net profit attributable to the parent company was 1.963 billion yuan, a year-on-year increase of 7.19%. In 2022, the company plans to have an operating revenue target of 28 billion yuan and a profit target of 7.47 billion yuan. It is proposed to distribute cash dividend of RMB 7.6 per 10 shares and 1 bonus share (including tax).
Ping An View:
The revenue of core categories maintained growth, with significant volume of oyster sauce, vinegar and cooking wine. In terms of products, the company’s core categories maintained growth. In 2021, the revenue of soy sauce / oyster sauce / seasoning sauce reached RMB 14.188/45.32/2.666 billion respectively, with a year-on-year increase of + 8.78% / 10.18% / 5.61%. The growth rate of the main business of soy sauce was stable, the volume of oyster sauce business (output + 13.42%, sales volume 11.46%), and the growth rate of seasoning sauce business slowed down due to the pressure of catering channels. While adhering to the three core categories, the company made every effort to promote the accelerated development of new categories. In the whole year, other categories achieved a revenue of 2.211 billion yuan, a year-on-year increase of + 13.37%. New categories such as vinegar and cooking wine have begun to take shape and become a new growth point.
The growth rate in the central and western regions accelerated, and the proportion of online revenue continued to increase. In terms of subregions, the regions with rapid revenue growth are the central, Western and southern regions, with a year-on-year increase of + 14.03% / 9.34% / 8.4% respectively, mainly driven by the coverage of blank channels and intensive cultivation of original channels. In terms of sub channels, the revenue of offline / online channels in 2021 was 22.892 billion yuan / 704 million yuan respectively, with a year-on-year increase of 7.73% / 85.20%. The bright performance of online channels stems from the company’s active strengthening of e-commerce channel layout, including community group purchase.
The rising cost suppresses the gross profit margin, reduces the cost and improves efficiency, and maintains the net profit margin. In 2021, the company achieved a gross profit margin of 38.66%, a year-on-year decrease of -3.51pct, mainly due to the significant rise in the prices of major raw materials such as soybeans. The net profit margin was 26.68%, with a year-on-year decrease of -1.44pct. The main reason why the net profit margin fell less than the gross profit margin was due to proper cost control. Specifically, the expense rate during the period was 7.75%, with a year-on-year rate of -1.23pct, of which the sales / management expense rate was 5.43% / 1.58%, with a year-on-year rate of -0.57 / -0.01pct. The company achieved a gross profit margin of 38.13% in Q4 of 2021, with a year-on-year increase of -3.73pct; The net interest rate was 28.01%, with a year-on-year increase of -4.09pct, which was more affected by the cost than that of the whole year.
Short term performance pains, medium and long-term return to benign. The company’s short-term performance is under pressure due to cost pressure and weak demand. However, according to the performance guidelines given in the annual report, the company’s target operating revenue / net profit in 2022 will increase by 12% / 12% compared with 2021, returning to double-digit growth. In the long run, as the leader of condiments, the company has outstanding competitive advantages in brand / channel. During the industry reshuffle period, the company continues to expand its coverage and accelerate the improvement of market share. We are still optimistic about the long-term development of the company. Considering the continuous rise of costs, we lowered the company’s EPS from 2022 to 2024 to 1.78/2.02/2.39 yuan (the previous value is expected to be 1.91/2.27 yuan for 20222023 EPS respectively), and the current share price corresponds to pe50.00 yuan 7x, 44.5x, 37.7x, maintain the “recommended” rating.
Risk tips: 1. Risk of macroeconomic weakness: economic growth declines and consumption upgrading does not meet expectations, resulting in the slowdown of consumption growth; 2. Risk of major food safety incidents: consumers are particularly sensitive to food safety issues. In case of major food safety accidents, consumers’ confidence in the brand will drop to the freezing point in the short term and it will take a long time to rebuild their confidence; 3. The price fluctuation of raw materials and sugar products is lower than expected, which may lead to a sharp rise in the price of raw materials and sugar products.
