\u3000\u3 Shengda Resources Co.Ltd(000603) 317 Sichuan Teway Food Group Co.Ltd(603317) )
Event: the company released its annual report for 2021 and achieved a revenue of 2.03 billion yuan, a year-on-year decrease of 14.3%; The net profit attributable to the parent company was 180 million yuan, a year-on-year decrease of 49.3%; The net profit deducted from non parent company was 120 million yuan, a year-on-year decrease of 60.5%. Among them, 21q4 achieved a revenue of 630 million yuan, a year-on-year decrease of 25.2%, and a net profit attributable to the parent company of 104 million yuan, a year-on-year increase of 136.8%. At the same time, it is proposed to distribute a cash dividend of 0.5 yuan (including tax) for every 10 shares.
The core business declined, and the customized meal tune performed well. In terms of products, in 2021, the company’s hot pot bottom material and Sichuan dispatching achieved revenue of 880 million yuan / 850 million yuan respectively, with a year-on-year growth rate of – 28.3% / – 10.4% respectively, which is mainly subject to 1) under the 20-year high base, the strong willingness of channels to suppress goods in early 21, and the high inventory pressure continued to 21q3; 2) Repeated outbreaks in the past 21 years have led to weak end consumer demand; 3) The emerging channels led by community group buying disrupted the price and diverted some consumers, and the two core businesses fell. Benefiting from the low price of pork, the income of winter adjusted products reached 210 million yuan in 21 years, with a significant year-on-year increase of 111.6%. In terms of channels, the revenue from distribution / customized meal adjustment / e-commerce channels was 1.57/2.5/160 billion yuan respectively, with a year-on-year increase of – 21.7% / + 55.9% / + 1%; Benefiting from capacity expansion, the b-end customization business grew rapidly. In terms of regions, the revenue growth of the company’s main sales areas Southwest / Central China / East China fell by more than 10%, and the revenue of North China and Northeast China fell by more than 20%. During the reporting period, the number of dealers increased by 408 to 3409 compared with last year. The company continued to optimize the dealer structure and accelerate the construction of national channel network.
The cost of raw materials continued to rise, and Q4’s profitability rebounded. In 2021, the company’s gross profit margin was 32.2%, a year-on-year decrease of 6.4pp, of which the gross profit margin in Q4 was 28.1%, a year-on-year decrease of 10.7pp. The pressure on the gross profit margin of the whole year is mainly due to 1) the rise in the price of oil raw materials; 2) In order to clean up the channel inventory, the company increased the promotion of buy, give and tie-in to offset the income. In terms of expenses, the annual sales expense rate was 19.5%, with a year-on-year increase of 2.3pp; Among them, the sales expense ratio of Q4 has dropped 18pp to 10.8%. In addition to the impact of the change of accounting standards, the main reason is that 21q4 company actively shrinks the investment of publicity expenses. The annual management expense ratio remained stable, with a slight increase of 1.1pp to 5.4% year-on-year. In the fourth quarter, when the channel inventory returned to benign, the promotion expenses decreased and the advertising intensity decreased significantly, driving the company’s Q4 net profit margin to increase by 11.4pp to 16.6%. The cost pressure continued, resulting in the annual net profit margin to decrease by 6.3pp to 9.1% year-on-year.
The implementation of reform releases kinetic energy, and the improvement of fundamentals is expected. 1) In terms of internal management mechanism, the company has promoted flat management since 21q3, and the functions of the strategic center have been disassembled to all business divisions to effectively stimulate the vitality of internal management. 2) After 22 years of operation, the company is expected to achieve low inventory in the channel, and the inventory in the channel is expected to go up smoothly. 3) In terms of products, the company supplemented the small b-end Dahongpao product line and strengthened the cultivation of large single products of haorenjia brand; In addition, the company started to raise prices in October 21, which effectively alleviated the upward pressure on costs. 4) The company launched a new round of equity incentive scheme, which expanded the incentive scope and reduced the difficulty compared with the previous one, which is conducive to fully mobilize the overall enthusiasm of the team. In the future, the polyphonic industry will grow steadily at a high speed of more than double digits, and small and medium-sized brands in the industry have accelerated their exit due to factors such as high costs and weak consumption in 21 years. As the leader of Sichuan flavor polyphony industry, after 21 years of adjustment, the company’s operating performance is expected to continue to improve in 22 years.
Profit forecast and investment suggestions. It is estimated that the EPS from 2022 to 2024 will be 0.32 yuan, 0.43 yuan and 0.56 yuan respectively, and the corresponding dynamic PE will be 55 times, 41 times and 32 times respectively, maintaining the “buy” rating.
Risk tips: the risk of price fluctuation of raw materials, the risk of repeated covid-19 epidemic, and the risk of deterioration of market competition pattern.
