\u3000\u3 Shengda Resources Co.Ltd(000603) 317 Sichuan Teway Food Group Co.Ltd(603317) )
Event: the company disclosed the annual report. In 2021, the operating revenue / net profit attributable to parent company / net profit not attributable to parent company deducted was RMB 2.026185/122 billion, with a year-on-year increase of – 14.34% / – 49.32% / – 60.53%. Among them, 21q4 achieved operating income / net profit attributable to parent company / deduction of net profit not attributable to parent company of RMB 628 / 104 / 58 million, with a year-on-year increase of – 25.22% / + 136.78% / + 347.78%.
The high base + weak demand + intensified competition put pressure on the performance in 2021, and it is expected that young people will return to high growth in 2022. By category, in 2021, hot pot seasoning / Chinese dish seasoning / sausage bacon seasoning / chicken essence / spicy sauce were – 28.3% / – 10.4% / 111.6% / – 21.9% / – 5.9% year-on-year respectively. From the perspective of different channels, in 2021, dealers / customized meal dispatching / e-commerce / direct business supermarket / foreign trade were – 21.7% / + 55.9% / + 1% / + 14.3% / + 9% year-on-year respectively. Among them, the growth rate of sausage and bacon seasoning and customized meals is higher, which is mainly due to the recovery of demand promoted by the decline of pork price and the accelerated recovery of catering after the epidemic. The overall performance pressure is mainly due to: 1) the high base caused by the demand outbreak during the epidemic in 2020, the weak consumption in 2021 and the marginal slowdown of industry growth; 2) Previously, the high growth of the industry attracted more enterprises to enter the market, such as Haitian, a traditional condiment company, which participated across the border, resulting in intensified competition in the industry; 3) The channel inventory was high at the beginning of the year, which affected the channel confidence. Looking forward to 2022, the company has returned the inventory to a reasonable level by increasing promotion and optimizing dealer inventory management, superimposing the competitive pattern or marginal improvement (some small and medium-sized enterprises or passively withdraw when the industry is under pressure), and the company is expected to resume high growth.
The increase of raw material price is roughly lower than that of net interest rate, the marginal cost-effectiveness ratio is increased, and the price increase is expected to alleviate the pressure on profits. The net profit margin of the company in 2021 was 9.1%, with a year-on-year increase of – 6.3pct, mainly due to the large increase in the cost of raw materials such as grease and packaging materials, resulting in a year-on-year increase in the gross profit margin of – 9.3pct to 32.2%, and an increase in the accrued expenses of equity incentive, resulting in a year-on-year increase in the rate of management expenses of + 1.1pct to 5.4%. The company’s sales expense rate in 2021 was 19.5%, with a year-on-year increase of -0.6pct. Quarterly, the sales expense rates in 2021q1-2021q4 were 17.9% / 28.7% / 23.8% / 10.8% respectively, and – 18pct year-on-year in the fourth quarter, mainly due to the return of inventory to the normal level, the marginal improvement of competition pattern and the reduction of promotion expenses and advertising expenses. The company began to raise the price of some products in mid October 2021. It is expected that the gross profit margin will recover, the improvement trend of cost-effectiveness ratio will continue, and the profitability is expected to accelerate in 2022.
Internal positive change, external environment improvement, inflection point or coming. 2021 is the year of management reform of the company, including 1) flattening the organizational structure in Q3, dismantling the functions of the strategic market center and delegating them to the level of the business division to improve efficiency; 2) Optimize the salary system, improve the internal assessment mechanism and stimulate the enthusiasm of employees; 3) Increase support for dealers by increasing sales personnel and hierarchical management of dealers. On the basis of straightening out the internal mechanism, the company will continue to improve the product matrix, accelerate the sinking of channels, build intelligent production workshops, and continuously improve its comprehensive competitiveness. The market share is expected to increase steadily.
Investment suggestion: it is estimated that the company’s EPS in 2022, 2023 and 2024 will be 0.38, 0.50 and 0.64 respectively, and the six-month target price will be 22.5 yuan, corresponding to 45x PE in 2023.
Risk warning: industry competition intensifies; Price fluctuation of raw materials
