\u3000\u3 Bohai Water Industry Co.Ltd(000605) Hengfeng Information Technology Co.Ltd(300605) 300)
Event:
The company released the annual report and the first quarterly report. In 2021, the operating revenue was 2.399 billion, the same as + 28.02%, the net profit attributable to the parent was 151 million, the same as – 30.19%, and the non net profit deducted was 130 million, the same as – 33.19%, eps0 39 yuan / share, and it is proposed to pay out 1.2 yuan (including tax) for every 10 shares. Among them, Q4’s operating income is 645 million, the same as + 5.58%, the net profit attributable to the parent is 40 million, the same as – 45.41%, and the net profit deducted is 30 million, the same as – 54.58%. Q1 achieved an operating income of 522 million, the same as – 11.32%, a net profit attributable to the parent company of 17 million, the same as – 69.53%, and a deduction of non net profit of 14 million, the same as – 73.95%.
Key investment points:
1. The impact of the epidemic exceeded expectations and the cost pressure was obvious. In the second half of last year, the epidemic broke out in some scattered places, limiting the consumption scenes of milk tea such as travel and parties and the Consumption Willingness of residents. East China is a key area for milk tea consumption. The epidemic was found in Suzhou and Shanghai in Q1 this year. The situation in Shanghai began to intensify in March, affecting the logistics and transportation in the surrounding areas. The company’s factories are located in Suzhou, Nantong and other places, so the delivery is subject to certain resistance, and the export business of end of fat planting is also affected, resulting in the slowdown of revenue growth of Q4 company last year and the decline in 2022q1. The price of main raw materials of the profit side company has risen sharply since last year. Since the beginning of the year, the prices of palm oil and corn starch continue to rise. As a supplier of midstream food raw materials, the company bears more cost pressure. Therefore, the profit has declined year-on-year since the second quarter of last year.
2. The performance of plant-based drinks is brilliant, and the proportion of catering channels continues to increase. In 2021, the company realized a revenue of RMB 1.857 billion from the end of fat planting business, with a year-on-year increase of 25.46%. Q4 sales were slightly damaged, with a year-on-year decrease of – 2.1%. In 2022q1, it decreased significantly, with a year-on-year decrease of – 19.37% to RMB 379 million. The coffee business maintained a high growth. In 2021, it increased by 109.07% to 102 million yuan, and the growth rates of 2021q4 and 2022q1 were close to doubling. For the first time, the annual report separately disclosed plant-based products, mainly including coconut and oat milk liquid and solid drinks. Last year, the revenue was 71 million yuan, with a year-on-year increase of 147.28%, mainly contributing to the 2B end. This year, Q1 plant-based drinks has achieved an income of 183284 million yuan, with a year-on-year increase of + 177.85%. The growth trend is booming. A new 2C end new product, extraordinary wheat, was launched in March, with good sales feedback and is expected to contribute to a new increase in revenue. In terms of channels, direct sales channels continued to grow at a high rate of + 38.38% to 1.927 billion yuan in the whole year, mainly driven by catering chain customers (catering chain channel revenue + 42.66% to 1.31 billion yuan in 2021), and direct sales accounted for more than 80%. Q1 food industry enterprises, catering chains and distribution channels all declined to varying degrees. The food industry customers were mainly dragged down by exports, with a year-on-year decrease of 18.22%, and the catering chain channels declined relatively slightly.
3. The gross profit margin decreased significantly, and the profitability was under obvious pressure. Edible vegetable oil accounted for nearly 30% of the company’s raw material costs. Last year, the price of palm oil increased by 22% year-on-year, and has continued to increase by 40.5% since the beginning of the year. The prices of corn starch, milk powder and other raw materials also increased significantly, putting great pressure on profitability. The company and downstream customers jointly bear the pressure of rising costs, and the gross profit margin and net profit margin are obviously damaged. Excluding the impact of changes in accounting standards, the annual gross sales difference decreased by 6.97pct to 11.68% year-on-year, so the net profit margin decreased by 5.25 percentage points to 6.27%. The gross sales difference in Q1 decreased by 7.12pct to 8.13% year-on-year, and the net profit margin decreased by 6.29pct to 3.30%.
4. Actively layout the coffee and plant-based beverage business and be optimistic about the performance elasticity after the cost price falls. The company is the leader of China’s vegetable fat end. Since it has deeply cultivated the vegetable fat end market for 20 years, it has formed multiple competitive advantages, such as excellent products, strong R & D, rapid response to downstream demand, rich customer channel resources and so on. In recent years, the downstream ready-made tea has developed rapidly, and the demand for fat powder has increased. It is expected that the middle and low-end tea is still the mainstream price band of ready-made tea. Considering both cost and taste, the middle and low-end milk tea has a strong driving force to use fat powder as raw material. We expect the growth of vegetable fat powder will continue with the development of milk tea industry. The company provides more than 1000 enterprises with vegetable fat powder and other products, of which more than 80% are customized products, meeting customers’ needs for products with diverse flavors and characteristics. By the end of 2021, 93.18% of the company’s sales revenue had come from zero trans fat products, and it is expected to successfully realize the zero trans plan by the end of this year. At the same time, the company continues to enrich its coffee and plant beverage business and create a second growth curve. The coffee business is in the stage of rapid growth. In the future, the company will give full play to the synergy between the coffee business and the fat end business, increase research investment in the application of coffee in different scenarios, and continue to launch high-quality and customized coffee products for market segments and customer groups. In terms of plant drinks, relying on the independently developed enzymatic hydrolysis and concentration technology, the company took the lead in listing frozen oat milk. This year, the newly developed oat milk products are listed on the C-end, which is expected to contribute new revenue. The profit side is still under pressure due to the high price of raw materials, but the performance is expected to show high elasticity after the cost decreases.
Profit forecast and investment rating company’s main raw materials palm oil and corn starch prices continue to rise, and the profit side is expected to be under more pressure. However, after the cost price falls in the later stage, the company’s performance is expected to show high flexibility. It is suggested to pay close attention to the changes on the cost side and wait for the inflection point of performance. As the impact of the epidemic in the first and second quarters of this year exceeded expectations, we lowered our profit forecast. The company’s net profit attributable to the parent company in 2022 is expected to be 126 million yuan, and the EPS from 2022 to 2024 will be 0.5 billion yuan 29 / 0.46/0.56 yuan, pe44 / 27 / 22 times, giving an overweight rating.
Risk tip 1) downstream demand is less than expected; 2) Consumers’ awareness of fat end is lower than the expected risk; 3) Price fluctuation risk of raw materials; 4) Food safety risks; 5) The impact of the epidemic exceeded expectations.
