\u3000\u30 Shaanxi Zhongtian Rocket Technology Co.Ltd(003009) 73 Ligao Foods Co.Ltd(300973) )
Event:
Ligao Foods Co.Ltd(300973) released the annual report of 2021 and the first quarterly report of 2022: the company achieved a revenue of 2.817 billion yuan in 2021, with a year-on-year increase of 55.66%, a net profit attributable to the parent company of 283 million yuan, with a year-on-year increase of 21.98%, a deduction of 269 million yuan, with a year-on-year increase of 19.20%. The company plans to pay out 5 yuan (including tax) for every 10 shares. In 2022, Q1 revenue was 630 million yuan, with a year-on-year increase of 8.83%, and the net profit attributable to the parent company was 40 million yuan, with a year-on-year decrease of 45.29%.
Key investment points:
2021 ended successfully, and Q1 performance in 2022 did not meet expectations. The company’s Q4 revenue in 2021 was 856 million yuan, a year-on-year increase of + 40.4%, and the net profit attributable to the parent company was 86 million yuan, a year-on-year increase of + 16.6%. Previously, the company had issued an annual performance forecast, and Q4 revenue and profit fell in the central position of the previous forecast. The growth rate of Q1 revenue has slowed down this year, of which the revenue of frozen baking has increased by 11.14% year-on-year and the revenue of baking raw materials has increased by 5.57% year-on-year, mainly due to 1) Q1 is affected by the local outbreak of the epidemic, the delivery of some factories is limited, and the scene of downstream baking stores is seriously damaged; 2) Q1 last year was the quarter with the fastest growth rate of annual revenue, with a year-on-year increase of 130.45%. The high base also brought great pressure on Q1 this year; 3) The earlier time of the Spring Festival leads to the earlier preparation of goods. At the same time, affected by the continuous rise in the cost of major raw materials such as oil and the provision of equity incentive fees, the Q1 profit performance is lower than expected. If the impact of equity incentive payment of RMB 19000 is excluded, the deduction of non net profit is RMB 55 million, a year-on-year increase of – 23.97%.
The proportion of frozen baking business continued to increase, and the commercial supermarket channel performed well. By category, the revenue of frozen baking business in 2021 was 1.718 billion yuan, with a year-on-year increase of 79.70%, and the proportion of revenue increased by 8.2pct to 61.0%. Mainly benefited from the expansion of channels and the improvement of the penetration rate of frozen baking products, the continuous large-scale volume of large single products such as cassava and frozen cake, and the release of new production capacity such as Henan factory basically meets the needs of channels. The business income of cream, fruit products, sauces and other baking raw materials in the whole year was 471 million yuan, 218 million yuan, 184 million yuan and 224 million yuan respectively, with a year-on-year increase of 27.0% / 29.3% / 33.2% / 28.1% respectively. We expect to mainly benefit from the one-stop purchase demands of downstream customers. The best-selling of frozen baking products has a strong role in promoting baking raw materials. In terms of distribution channels, the annual distribution channel revenue was 1.835 billion yuan, a year-on-year increase of 30.34%; As large single products continued to sell well in supermarkets, the annual revenue from direct sales channels was 962 million yuan, a year-on-year increase of 144.43%.
With the continuous rise of costs and the impact of equity incentive expenses, the net interest rate in Q1 decreased significantly. In 2021, the company’s gross profit margin was 34.90%, a year-on-year decrease of 3.37pct, of which Q4 gross profit margin increased by 3.36pct to 34.49%, mainly due to the increase in the proportion of frozen baking products with higher gross profit margin, which contributed greatly to the improvement of the overall gross profit margin. At the same time, the capacity of new factories in Henan was released one after another to solve the problem of limited capacity of single products with high gross profit margin. Due to the increase of equity incentive fees and raw material costs, the net interest rate of Q4 decreased by 2.04pct to 10.00% year-on-year. The decline of Q1 profit in 2022 was affected by the same factors: 1) since the second half of 2021, the price of palm oil has continued to rise, reaching nearly 11700 yuan / ton at the highest, with an increase of more than 50%. The adjustment of product structure and the sharp rise of costs that are difficult to be covered by the price increase of some products, and the gross profit margin of Q1 decreased by 3.40pct to 33.09% year-on-year; 2) Q1 accrued equity incentive expenses. The management expense ratio increased by 5.93pct to 12.34% year-on-year, resulting in a year-on-year decrease in net interest rate of 6.29pct to 6.36%. After excluding the impact of equity incentive expenses, the deduction of non net interest rate decreased by 3.71pct to 8.73% year-on-year.
Affected by the double pressure of the epidemic and rising costs in the short term, the logic of long-term growth remains unchanged. Looking ahead to Q2, the epidemic broke out in many places, the consumption scene at the b-end was seriously damaged, and the logistics in some areas was blocked. The downstream of the company was mainly bakery, catering (tea), super members and other consumption scenes, which were affected by the epidemic to varying degrees. The impact of the epidemic is expected to continue in May, and the cost of main raw materials is still at a high level. Under the dual pressure, Q2 performance is expected to continue to be under pressure. However, we believe that the epidemic is a short-term impact. The company benefits from the development of the baking industry, and the logic of long-term growth is clear. This year, the company’s production lines such as tarts and frozen cakes in Henan plant will be put into operation successively, and the production lines such as tarts, doughnuts and cassava in Zhejiang plant will also be expected to be partially put into operation in the second half of the year, providing capacity support for the recovery of demand after the slowdown of the epidemic situation. At the same time, it has effectively solved the problem of limited capacity of high gross profit single products and brought about continuous improvement of profitability.
Profit forecast and investment rating: considering the impact of the epidemic and the rising cost of raw materials, we lowered the profit forecast. It is estimated that the company’s net profit attributable to the parent company in 2022 / 2023 / 2024 will be RMB 283 / 376 / 474 million, EPS will be RMB 1.67/2.22/2.80/share, and the corresponding PE will be 51 / 38 / 30 times respectively. If the impact of equity incentive expenses is excluded, the corresponding PE will be 41 / 34 / 29 times respectively, and the “overweight” rating will be given.
Risk tips: 1) the improvement trend of the epidemic situation is less than expected; 2) Risk that the production capacity is less than expected; 3) Food quality and safety risks; 4) Risk that the promotion of new products does not meet expectations; 5) Price fluctuation risk of raw materials; 6) Industry competition intensifies risks.
