\u3000\u3 Shengda Resources Co.Ltd(000603) 288 Foshan Haitian Flavouring And Food Company Ltd(603288) )
Event:
Foshan Haitian Flavouring And Food Company Ltd(603288) released the annual report of 2021. The company achieved a revenue of 25.004 billion yuan (year-on-year + 9.71%), a net profit attributable to the parent company of 6.671 billion yuan (year-on-year + 4.18%), and a non net profit attributable to the parent company of 6.43 billion yuan (year-on-year + 4.09%). Among them, Q4’s revenue was 7.010 billion yuan (year-on-year + 22.85%), the net profit attributable to the parent company was 1.963 billion yuan (year-on-year + 7.19%), and the non net profit attributable to the parent company was 1.849 billion yuan (year-on-year + 4.02%). Under the impact of community group purchase and epidemic situation, the company failed to achieve the annual target of 21 years (16% and 18%).
The company has set a 22 year target: the company plans to achieve a revenue target of 28 billion yuan and a profit target of 7.46 billion yuan, an increase of 12% and 12% respectively.
Comments:
Income analysis: community group buying affects quarterly performance, and the impact of the epidemic affects regional performance. The company achieved a revenue of 25.004 billion yuan, a year-on-year increase of + 9.71% (Q1: + 21.65%; Q2: – 9.39%; Q3: + 3.11%; Q4: + 22.85%). Affected by community group purchase in Q2, Q3 company actively embraced and responded to it, which was caused by dealers’ hoarding after Q4 price increase. 1) Sub products: the sales of the three main categories reached 21.4 billion yuan, with a year-on-year increase of + 8.66%, including soy sauce of 14.2 billion yuan, with a year-on-year increase of + 8.78%, oyster sauce of 4.5 billion yuan, with a year-on-year increase of + 10.18%, seasoning sauce of 2.7 billion yuan, with a year-on-year increase of + 5.61%, and other categories of 3.6 billion yuan, with a year-on-year increase of 16.3%, mainly due to the large volume of vinegar and cooking wine. The growth rate of each major category is; 2) Sub regions: the central region performed slightly better, with an increase of 14%, followed by the western and southern regions. We believe that it is due to the impact of the epidemic on different regions at different times; 3) Number of dealers: the company had 7430 dealers at the end of the year, with a net increase of 379 in the whole year. 4) Sub channels: good online growth, with offline + 7.73% and Online + 85%.
Profit analysis: the cost increases, the gross profit is under pressure, and the blade improves efficiency. The net profit attributable to the parent company was 6.67 billion yuan, a year-on-year increase of + 4.18% (Q1: + 21.13%; Q2: – 14.68%; Q3: + 2.75%; Q4: + 7.19%). The annual gross profit margin was 38.66%, with a year-on-year increase of -3.51pct, mainly due to the rise of raw material costs. During the period, the expense rate was 7.75% (year-on-year -1.23pct), of which the sales expense rate decreased by 0.56pct. Under the background of significant upward cost pressure, the company looked inward and turned its blade to itself, and the profit still achieved positive growth. The gross profit margin of Q4 was 38.13%, with a year-on-year increase of -3.73pct, mainly as follows: 1) the cost of raw materials rose sharply in Q4; 2) With the change of accounting standards, the promotion is no longer included in the expense, but offset the income (the transfer of freight to cost starts from 20q2, and the transfer of promotion to cost starts from 21q2)
Medium term outlook: the industry does not rule out the possibility of secondary price increase, and the transmission of price increase needs to be confirmed. We repeated the previous price increases in the condiment industry and believed that this price increase is similar to the price increase in 10-12 years. The resurgence of imported inflation does not rule out the possibility of a second price increase. At present, CPI is gradually rising. Although it is uncertain whether PPI will move smoothly to CPI, from the perspective of imported inflation, the main grain producing countries are in the stage of replenishing inventory after the epidemic. With the occurrence of natural disasters in some areas, the prices of grain crops such as soybeans are expected to rise sharply and the pressure on enterprises is increased. Driven by multiple reasons, the cost and price of raw materials are expected to rise gradually, and the possibility of secondary price increase cannot be ruled out. In addition, we believe that four rounds of verification at both ends are needed in the first half of the year after the price increase, which is still needed at present. Half a year after the price increase, it needs to go through four rounds of verification at both ends. One is the verification at the home end, the other is the verification at the catering end, which needs to be verified in the light and peak seasons respectively. The first stage of price increase (KA peak season) has passed the assessment, and the second stage (catering off-season / peak season) still needs to be confirmed. As a leading company in the industry, Haitian has absolute advantages in cost locking and operational efficiency. The goal of double 12% in 2022 is challenging but feasible. On the one hand, the company locks the cost price of raw materials such as soybeans in advance to reduce the cost pressure in subsequent quarters. Secondly, the overall operation efficiency of the company is higher than that of other enterprises in the industry. Whether it is the internal operation efficiency of the company, external publicity and channel market investment, this will effectively stimulate the actual sales, reduce the internal loss and achieve better net profit.
Long term outlook: continue to do a good job in condiments in the third five year plan, and constantly deepen the categories and channels. 20192023 is the five years of the company’s third five year plan. The company will continue to make efforts in categories and channels, insist on making condiments and strive for double-digit growth.
1) categories: further build the market leading advantages of the three core categories of soy sauce, oyster sauce and soybean sauce. The proportion of high-end products of soy sauce is expected to increase from 40% to 50%, expand the volume of oyster sauce, strengthen the cultivation of new markets of soybean sauce, and pay attention to the R & D and cultivation of new categories such as vinegar and cooking wine
2) channels: build a thick channel network, strengthen the development of blank and weak markets in the third and fourth tier cities, and promote the steady growth of income. According to the business growth target of the company in the “third five year plan”, the revenue and profit from 2019 to 2023 will maintain a compound growth of more than double digits.
Considering the structural upgrading, product volume and price space and the deepening progress of the company’s channels, we judge that the probability of reaching the third five year plan is high and continue to be optimistic for a long time.
Profit forecast and rating: maintain the “overweight” rating Foshan Haitian Flavouring And Food Company Ltd(603288) relying on the outstanding advantages of brand, channel, category and scale, the moat continues to be widened. Benefiting from the dividends of concentration improvement, consumption upgrading, scale and management, the company will continue to maintain sustained and steady growth in the future. In the long run, the “third five year plan” is expected to be realized smoothly. The company’s price increase is expected to reshape channel profits, but due to the repeated impact of the epidemic, the impact of price increase on sales will last longer than in the past. We expect the revenue growth rate from 2022 to 2024 to be 12%, 15% and 16% respectively; The growth rate of net profit was 12%, 18% and 19% respectively; The corresponding EPS is 1.78, 2.10 and 2.49. Considering the continuous and stable growth of performance and the valuation premium of the leader, we give 60 times PE according to the EPS in 2022, and the stage target price is 107 yuan, maintaining the “overweight” rating.
Risk warning: industry competition intensifies; Price fluctuation of raw materials; Food safety issues;
