Weekly topic: resumption and impact of raw milk prices
Resumption: there have been three obvious rising tides in the past decade. 1) From July 2009 to March 2011, the price of raw milk increased by 39%. Affected by the melamine incident, the stock of dairy cows decreased significantly by 17% in 2009. At the same time, the prices of corn and soybean meal continued to rise, pushing up the feed cost of aquaculture. 2) From November 2012 to February 2014, the price of raw milk increased by 28%. China’s milk production fell by 5.5% in 2013 due to the rare high temperature weather and the outbreak of type a foot-and-mouth disease. Internationally, New Zealand suffered a severe drought and another outbreak of Botox in milk powder, and the price of large bags of powder imported from China rose. 3) Since May 2020, the price of raw milk has increased by 18%. This is mainly due to the rise in feed prices caused by the epidemic and the demand boom caused by the improvement of consumers’ health awareness after the epidemic. We expect that the price of raw milk will remain high in 2022, but the growth rate will slow down.
Impact: 1) the price increase should respond to the rising cost and be transmitted to the statement end in one to two quarters. If the price increase effect is good, it will be transmitted to the statement end in a quarter. Yili raised the price after 2013q3, and the growth rate of net profit and revenue in 2013q4 increased by 62.8/16.4% month on month respectively. After the price increase in 2010q4, the demand did not fully recover after the melamine incident, and the transmission time was extended to two quarters. 2) Reduce and promote the reduction of fees, and the gross sales difference in the next year was improved. From 2010 to 2020, the sales expense rate of major dairy enterprises decreased to varying degrees. The gross sales difference of Yili increased by 2.49/3.25 PCT respectively in the following year.
Outlook: the end demand of dairy products is strong against the trend. Under the conditions of price increase and fee reduction, the profit elasticity of dairy enterprises appears, and the profit certainty is strong. Under the strategic differentiation of Yili and Mengniu, the competition pattern is optimized and the superimposed cost pressure is slowing down. The leader will continue to upgrade the product structure and improve the profitability. It is recommended to Inner Mongolia Yili Industrial Group Co.Ltd(600887) , and pay attention to Mengniu Dairy industry.
This week’s research results: we have recently issued two in-depth reports on Baijiu Baijiu liquor industry, “liquor industry re opening and Outlook”, “high-end liquor boom, and steady sailing”, aiming at establishing industry framework and multi-dimensional description of high-end liquor industry. The main conclusion is that the industry boom since 2016 is still in the same direction, the trend of structural prosperity is unchanged, and liquor companies are full of internal driving force. In the future, we are more optimistic about the capacity expansion of both high-end and sub high-end price bands.
The company’s performance disclosure this week: Yihai International’s revenue in 2021 was 5.94 billion yuan (YoY + 10.9%), and the net profit attributable to the parent was 766 million yuan (yoy-13.4%) Foshan Haitian Flavouring And Food Company Ltd(603288) 2021 revenue of 25.004 billion yuan (YoY + 9.7%), net profit attributable to parent company of 6.671 billion yuan (YoY + 4.18%); In 2021, the company’s turnover was 33.387 billion yuan (YoY + 6%), and the net profit attributable to the parent company was 3.583 billion yuan (YoY + 35%) Chongqing Fuling Zhacai Group Co.Ltd(002507) 2021: the company’s revenue was 2.519 billion yuan (YoY + 10.8%), and the net profit attributable to the parent company was 742 million yuan (yoy-4.5%) Shanghai Milkground Food Tech Co.Ltd(600882) 2021: the company’s revenue was 4.478 billion yuan (YoY + 57.3%), and the net profit attributable to the parent company was 154 million yuan (YoY + 160.6%) Yihai Kerry Arawana Holdings Co.Ltd(300999) 2021: the turnover of the company was 226225 billion yuan (YoY + 16.1%), and the net profit attributable to the parent company was 4.132 billion yuan (yoy-31.2%).
Risk tips: the macro economy is less than expected, the impact of the epidemic is repeated, the recovery of food demand is less than expected, and food safety problems.
