\u3000\u3 China Vanke Co.Ltd(000002) 507 Chongqing Fuling Zhacai Group Co.Ltd(002507) )
Optimistic about the improvement of the company’s profit margin and maintain the “buy” rating
Chongqing Fuling Zhacai Group Co.Ltd(002507) released the first quarterly report of 2022, and achieved revenue of 690 million yuan in 2022q1, a year-on-year decrease of 2.9%; The net profit was 214 million yuan, a year-on-year increase of 5.4%; The net profit decreased by 1.95 billion yuan year-on-year. We keep the profit forecast unchanged. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be RMB 970 million, RMB 1.17 billion and RMB 1.4 billion respectively, with a year-on-year increase of 31.1%, 19.9% and 20.2%, and EPS of RMB 1.10, 1.31 and 1.58 respectively. The current share price corresponds to PE of 31.3, 26.1 and 21.7 times. Considering that the short-term demand for pickled mustard benefited from the epidemic, there was strong certainty in the improvement of profit margin during the year, and the “buy” rating was maintained.
The revenue in the first quarter was in line with expectations, and the profit was slightly lower than expected
2022q1 revenue fell by 2.9%, mainly due to the high base in the same period last year. The revenue in the first quarter mainly came from: first, the direct price increase in 2021q4 brought average price growth; Second, new products will be put on the market after 2022q1 product upgrading; Third, the epidemic situation has driven the demand for preserved mustard. At the end of the first quarter, accounts receivable increased by 1803% year-on-year, mainly due to the granting of credit lines to dealers in order to support market sales and enhance competitiveness; Contract liabilities increased by 60.8% year-on-year, indicating that dealers paid actively and had sufficient orders in the second quarter. Considering the demand driven by the epidemic and the category diversification strategy, we expect to achieve double-digit growth in revenue in the whole year.
In 2022q1, the deduction of non net profit decreased by 3.1%, and the increase of investment income led to the increase of overall net profit by 5.4%
In 2022q1, the gross profit margin was 52.4%, down 7.7pct year-on-year. First, due to the change of accounting standards, freight is included in cost settlement; Second, 2021 high priced raw materials were still used in the first quarter. In 2022q1, the sales expense rate decreased by 6.3pct to 17.9% year-on-year, mainly due to the adjustment of freight subject and the reduction of advertising expenses of China Central Television and ladder media. The increase of 1.1pct in the management expense rate is due to the increase in employee compensation and amortization of intangible assets; The financial expense ratio decreased by 1.8pct year-on-year, mainly due to the increase of interest income. The investment income of 21 million led to an increase in the overall net interest rate of 2.4pct.
The diversification strategy continues, and the improvement of profit margin is the biggest highlight
In 2022, the company will carry out market promotion by means of diversified categories (pickled mustard, cooked food, seasoned vegetables and other categories) and diversified channels (developing catering channels). Therefore, the supporting organizational structure and personnel setting are basically completed, waiting for efforts to expand the market. The improvement of profit margin is the biggest attraction in 2022. The main sources are as follows: first, the effect of price increase at the end of the year should appear throughout 2022; Second, the purchase price of raw vegetables is relatively low, and the cost reduction is relatively clear; Third, considering the reduction of advertising expenses, the sales expense rate is expected to shrink slightly.
Risk tips: macroeconomic fluctuation risk, market expansion and competition risk, raw material price fluctuation risk, etc
