\u3000\u30 Beijing Zznode Technologies Co.Ltd(003007) 83 Three Squirrels Inc(300783) )
Event: the company disclosed the annual report of 2021 and the first quarterly report of 2022. (1) In 2021, the company achieved a revenue of 9.77 billion yuan, a year-on-year increase of – 0.2%; The net profit attributable to the parent company was 410 million yuan, a year-on-year increase of 36.4%, and the net profit not attributable to the parent company was 320 million yuan, a year-on-year increase of 30.7%. 4q21’s revenue was + 5.4% year-on-year, and the net profit attributable to the parent company lost 31 million yuan. (2) In the first quarter of 2022, the company achieved a revenue of 3.09 billion yuan, a year-on-year increase of – 15.9%; The net profit attributable to the parent company was 160 million yuan, a year-on-year increase of – 48.8%; Deduction of non parent net profit of 120 million yuan, a year-on-year increase of – 57.4%.
Key points supporting rating
In 2021, it ended smoothly, with good performance in key categories. (1) In 2021, the company adhered to the profit output orientation during the transition period, and achieved a year-on-year increase of 36.4% in the net profit attributable to the parent company through omni-channel cost control and improvement of supply chain efficiency. In the second half of the year, the company invested more than 100 million yuan (4q21 sales expenses + 129% year-on-year), which affected the short-term profit, and the net profit attributable to the parent company of 4q21 was 31 million yuan. (2) The category structure was adjusted, and the key categories performed well. In 2021, the company focused on nuts in its product strategy. The revenue of nuts exceeded 5 billion yuan, with a year-on-year increase of + 4.3% and a year-on-year gross profit margin of + 6.9pct. The adjustment of product structure reached expectations. In addition, the sales of Xiaolu blue exceeded 550 million yuan, achieving a nearly 10 fold increase, and the loss gradually narrowed in the second half of the year.
The rebound of the epidemic is superimposed on the intensification of online competition, and 1q22 growth is under pressure. 1q22 company’s revenue and net profit attributable to the parent company were – 15.9% and – 48.8% respectively year-on-year. (1) On the revenue side, the Spring Festival will move forward in 2022, and the sales of the new year goods festival will be affected by seasonal factors. The decentralization trend of online channel traffic continues, and the increase of traffic cost superimposes the phased logistics outage caused by the epidemic, resulting in a decline in online sales. For offline channels, the company adjusted its distribution strategy. At the same time, some stores were affected by the epidemic, and the revenue growth was under pressure. (2) On the profit side, under the influence of the high base, the rise of raw material prices, the increase of advertising expenses and the increase of share based payment expenses, the profit in the first quarter fell to a large extent.
Outlook: the short-term disturbing factors are still there, and the pains in the transition period are inevitable. Taking multiple measures to help achieve a successful transition. (1) The impact of the short-term epidemic and cost pressures remain. Since March, the rapid rebound of the epidemic has had an impact on the company’s sales. We expect that the impact of the epidemic in the second quarter will still exist. In addition, the price of raw materials remains high, and we believe that the company is expected to continue to cope with the cost pressure through cost control and supply chain efficiency improvement. (2) The pains in the transition period are unavoidable, and the company takes multiple measures to actively respond to the challenges. In 2022, the company defined the new strategic direction of “focusing on the nut industry, creating a multi brand model, and gradually moving towards health, digitization and globalization” in the next decade. In terms of business strategy, the company will continue to promote the strategy of focusing on nuts, accelerate the offline distribution layout, promote the rapid growth of sub brands, promote organizational upgrading, and strive to realize the transformation smoothly. We believe that the company is in a critical period of transformation, and the short-term pain is inevitable. However, the company has clear transformation ideas and firm determination. It is expected to smoothly enter the high-quality development path through transformation, and is optimistic about the long-term development prospects of the company.
Valuation
According to the annual report, we adjusted the previous profit forecast and expected EPS of 0.75, 0.92 and 1.10 yuan in 22-24 years, with a year-on-year increase of – 26.4%, + 21.9% and + 19.5%. We are optimistic about the company’s long-term development prospects. Considering the short-term performance fluctuations faced in the transition period, we adjusted to the overweight rating.
Main risks of rating
New product promotion and channel expansion are less than expected, raw material costs fluctuate, and food safety problems.
