\u3000\u3 Bohai Water Industry Co.Ltd(000605) 337 Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) )
Events
The company released 22q1 performance: in 2022q1, the company achieved operating revenue of 342 million yuan (+ 3.32%), and net profit attributable to parent company of 42 million yuan (- 22.64%).
Comments
The net profit performance of 22q1 was lower than expected, mainly due to the superposition of the impact of the epidemic and the pressure on the cost
The main reasons for the slowdown of the company’s revenue growth in 2022q1: the impact of the epidemic on the company’s operation (mainly reflected in terminal dynamic sales, logistics and transportation, etc.); The company’s net profit growth slowed significantly, mainly due to: 1) the cost of raw materials such as large package powder increased significantly in 22q1; 2) During the Spring Festival, the advertising fee will be concentrated. Specifically——
1) product side: the growth rate of milk beverage slows down significantly, and the growth rate of other products is stable under the low base. In 2022q1, the revenue of milk beverage products and other products reached 328 million yuan and 12 million yuan, with a year-on-year increase of + 1.54% and + 90.29% respectively. The proportion of revenue changed by – 1.98 and + 1.40 percentage points to 95.91% and 3.22% respectively compared with the same period last year;
2) market side: East China is obviously affected by the epidemic, and the number of dealers remains stable. In terms of channels, the distribution / direct marketing channels in 2022q1 increased by 1.54% and 27.76% year-on-year respectively to RMB 331 million and RMB 09 million; In terms of market, the 2022q1 revenue of East China, central China and southwest China, which account for a large proportion of the company’s revenue, changed by + 0.77%, + 1.25%, – 3.38 percentage points year-on-year respectively to 178 million yuan, 69 million yuan and 55 million yuan, of which East China was significantly affected by the epidemic. Under the influence of the epidemic, the number of dealers still achieved a net increase of 16 to 2666, with strong overall stability.
3) profit side: under the pressure of multiple costs, the profit side is temporarily under pressure. The company’s gross profit rate rose to 14.94% and the net profit rate of 2q1 and 202399% respectively, with the year-on-year change rate of the company’s gross profit rate rising to 14.42% and 17.42% respectively, and the year-on-year change rate of the company’s gross profit rate and net profit rate of 2q1 and 202342% respectively; Operating cash flow increased by 49.23% year-on-year to 97 million yuan; The cash collection was 390 million yuan, a year-on-year increase of 8.44%.
Take multiple measures to hedge the upward impact of the epidemic / cost, and be optimistic about the opportunities for month on month improvement after the epidemic
1) the milk beverage industry has a broad space and fertile soil for breeding large single products. With the improvement of residents’ consumption level and diversified demand, the growth rate of dairy beverages is higher than that of dairy products / soft drinks. At present, the dairy beverage industry is in the stage of capacity expansion, and the competition pattern of the industry is stable, with fertile soil for breeding single products of sweet milk.
2) we are optimistic about the improvement of profit side under the acceleration of nationalization after the epidemic. We believe that after the epidemic, the company may usher in the accelerated stage of nationalization, mainly due to: 1) taking multiple measures to hedge cost pressure: the company may hedge cost pressure by raising prices and launching new products; 2) Improve cost efficiency: affected by the epidemic in 22q1, the utilization rate of sales expenses may be lower than expected. The company may improve the cost-effectiveness ratio by adjusting the pace of cost investment;
3) the promotion of both channel quantity and quality is the basis of Nationalization: Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) the high channel profit is the core thrust + the gradual enhancement of product strength / brand strength + the standardization of management system & the stability of policy is the main reason to attract dealers to join; 4) The continuous landing of production capacity provides a guarantee for Nationalization: with the company’s expansion of production through IPO raising and investment plus foreign investment, it is expected that the company can finally achieve a production capacity of more than 550000 tons. In conclusion, we are optimistic about Zhe Jiang Li Zi Yuan Food Co.Ltd(605337) future development.
Recent profit forecast and valuation
It is estimated that the revenue growth rate of the company from 2022 to 2024 will be 22.1%, 29.4% and 26.8% respectively; The growth rate of net profit was 20.3%, 30.3% and 27.9% respectively; EPS is 1.5, 1.9 and 2.4 yuan / share respectively; PE was 21, 16 and 13 times respectively, maintaining the buy rating.
Catalyst: epidemic mitigation; Product price increase; National expansion accelerated; The price of raw materials went down.
Risk warning: the second outbreak of the epidemic in China; Single category risk; The promotion of new products is less than expected; Regional expansion is less than expected; Food safety issues; Raw material price fluctuation risk.
