\u3000\u3 Shengda Resources Co.Ltd(000603) 345 Fu Jian Anjoy Foods Co.Ltd(603345) )
Event:
Fu Jian Anjoy Foods Co.Ltd(603345) released the annual report of 2021 and the first quarterly report of 2022: the annual revenue in 2021 was 9.272 billion yuan, with a year-on-year increase of 33.12%, the net profit attributable to the parent company was 682 million yuan, with a year-on-year increase of 13.00%, and the net profit deducted was 560 million yuan, with a year-on-year increase of 0.51%. It is proposed to pay out 6.99 yuan (including tax) for every 10 shares. In the first quarter of 2022, the revenue was 2.339 billion yuan, a year-on-year increase of 24.16%, the net profit attributable to the parent was 204 million yuan, a year-on-year increase of 17.65%, and the non net profit deducted was 178 million yuan, a year-on-year increase of 13.99%.
Key investment points:
In 2021, revenue continued to grow at a high rate, and Q1 maintained a steady growth in 2022 under the high performance base. The company’s Q4 revenue in 2021 was 3.176 billion yuan, with a year-on-year increase of + 28.06%, and the net profit attributable to the parent company was 188 million yuan, with a year-on-year increase of – 16.11%. The revenue maintained rapid growth, while the performance pressure on the profit side was affected by many factors: 1) the increase of labor compensation and logistics costs, and increased the investment in technological transformation; 2) The proportion of dishes with low gross profit increased and the overall gross profit margin was lowered; 3) In 2021, the cost of some raw materials such as soybean oil and soybean protein increased. On the basis of last year’s high base (a year-on-year increase of 47.35%), Q1 revenue this year increased by 24.16% year-on-year to 2.339 billion yuan, and the net profit attributable to the parent increased by 17.65% year-on-year to 204 million yuan. It is estimated that excluding the consolidated business, Q1 revenue increased by 8.5% year-on-year, and the profit increased by single digits year-on-year. The C-end of Q1 company was affected by the epidemic, and the supply of noodles, rice and prefabricated vegetables was in short supply. At the same time, due to the cold climate in the peak season, the demand for lock fresh packaging and other hot pot products was increased. However, the Spring Festival this year was earlier, the consumption scene at the b-end was seriously damaged under the epidemic, and the logistics transportation in some areas was more difficult, resulting in an increase in logistics expenses, which had a certain negative impact on the company’s performance. Combined with the current situation of the industry, the company has made balanced development through all channels, so that the income and profit still maintain a steady increase.
The growth trend of dish products continues to double, and the performance of special direct marketing channels is outstanding. In the whole year, the company’s surimi products / meat products / flour and rice products / dish products achieved revenue of 34.78/21.42/20.54/1.429 billion yuan respectively, with a year-on-year increase of 23.07% / 19.16% / 23.60% / 1 and 12.41% respectively. The main business of traditional quick freezing maintained a steady growth trend of about 20%, while the growth of dish products was doubled driven by the continuous growth of industry demand and the promotion of the company’s focused resources. In 2022, Q1 benefited from the increase of household consumption demand, with the year-on-year increase of 16.59% for flour and rice products, and the year-on-year increase of 129.88% for dish products. Meat products and surimi products were basically the same year-on-year. In terms of channels, the distribution channels increased by 31.57% year-on-year to 7.723 billion yuan in 2021. At the same time, the company strengthened the development of multi-channel, established a separate direct customer department, and actively cooperated with catering customers such as Xiabu Xiabu and Haidilao, as well as leisure food upstream supply chain enterprises such as Hubei Xule and Zhejiang Ruisong. The special direct channel increased by 173.41% to 445 million yuan year-on-year. Supermarket channels were affected by the decline in household consumption, with an increase of only 9.53%. In Q1 this year, the distribution channel increased by 18.63% to RMB 1.758 billion, and the special channel continued the high growth trend, with a year-on-year increase of 295.05% to RMB 186 million.
The gross profit margin is under pressure in the short term, and the net profit margin has improved significantly. In 2021, the gross profit margin of the company decreased by 3.56% to 22.12%, and the net profit margin decreased by 1.31% to 7.36%. First, due to the increase of labor and technical transformation expenses, the direct labor and manufacturing expenses increased by 40.79% / 36.25% year-on-year respectively; Second, the proportion of cooked food products increased. The proportion of cooked food products increased by 5.8pct to 15.4% in the whole year, and its gross profit margin was only 14.21%. The gross profit margin in Q1 fell by 2.29% to 24.20% this year, which was mainly affected by the epidemic. The logistics obstruction led to the increase of transportation costs. In addition, the continuous volume of dishes still had an impact on the gross profit margin. Due to the continuous expansion of revenue scale, the scale effect of expense investment is obvious. The sales expense rate, management expense rate and financial expense rate decreased by 0.68pct, 0.35pct and 0.32pct respectively. In addition, as XINHONGYE and other consolidated businesses required less marketing expenses, which contributed to the overall net profit growth, the overall net profit margin of Q1 company decreased by 0.48pct to 8.74%, and increased by 2.80pct month on month.
The epidemic recovery + prefabricated vegetable business continues to increase in volume, and the annual income may continue the high growth trend. Looking forward to the whole year, the company will continue to make efforts in the prefabricated vegetable business, and large single products will continue to grow in large quantities. If the epidemic factors gradually subside, the revenue is expected to grow faster. At present, the prices of main raw materials such as fish pulp and meat on the cost side show a downward trend. In the future, the company will appropriately adjust the promotion policy in combination with the market demand and the fluctuation of the cost of raw materials corresponding to the products. At the same time, the company will adopt a more refined management mode in terms of expenses this year to ensure the stability of profitability. In addition, the company plans to acquire 70% equity of Qianjiang xinliuwu food. The company is mainly engaged in surimi and crayfish processing business, with a revenue of 823 million yuan and a net profit of 60 million yuan in 2021. This acquisition can further ensure the stable supply of fish slurry raw materials, improve the market share of the company in the aquatic prefabricated vegetable industry, form a strategic echo with Honghu XINHONGYE acquired by the company last year and Honghu prefabricated vegetable production base to be invested this year, comply with the business model of “self production + supply chain labeling + M & a” continuously implemented by the company, and further accumulate business experience in the prefabricated vegetable industry, so as to achieve faster development.
Profit forecast and investment rating. We expect that the company’s EPS from 2022 to 2024 will be 3.11, 3.83 and 4.89 yuan / share respectively, and the corresponding PE will be 40 / 32 / 25 respectively. Considering that the company, as the leader of the quick-frozen food industry, has a clear long-term business strategy, stable growth of the traditional main business and brilliant performance of the prefabricated vegetable business in the second growth curve, the company is expected to fully enjoy the growth dividend of the industry with excellent comprehensive strength. At the same time, the release of new production capacity is orderly, there is still room for improvement in long-term profitability, and the “buy” rating is maintained.
Risk tips: 1) intensified industry competition; 2) Food quality and safety issues; 3) Cold chain logistics transportation risk; 4) Economic downside risk; 5) Upstream raw material price fluctuation risk; 6) The future uncertainty of the penetration rate of the prefabricated vegetable industry; 7) Capacity release was less than expected.
