\u3000\u3 China Vanke Co.Ltd(000002) 891 Yantai China Pet Foods Co.Ltd(002891) )
Event: the company disclosed that in the annual report of 2021 and the first quarterly report of 2022, the company realized an operating revenue of RMB 2.882 billion in 2021, a year-on-year increase of 29.06%, and a net profit attributable to the parent company of RMB 116 million, a year-on-year decrease of 14.29%; In 2022q1, the company realized an operating revenue of 793 million yuan, a year-on-year increase of 41.58%, and a net profit attributable to the parent company of 23 million yuan, a year-on-year increase of 10.73%.
Revenue at home and abroad grew steadily, and exchange dragged down performance. Last year, the company’s annual revenue maintained a steady growth, of which the overseas revenue maintained a high growth rate of 29.58%, thanks to the continuous expansion of the American Pet consumption market; China’s market revenue reached 690 million yuan, a year-on-year increase of 23.97%. In the fourth quarter alone, the growth of operating revenue accelerated, with a year-on-year increase of 41.92%. In 2021, the RMB appreciated significantly, which dragged down the company’s overall profitability, and the company’s gross profit margin decreased by 4.47 percentage points compared with 2020. The company’s overall operation remained stable. By the end of 2021, the company’s net cash flow from operating activities was 213 million yuan, a significant improvement over the same period last year. The recent devaluation of RMB is expected to gradually improve the profitability of the company’s export business.
The sales of staple grains in the Chinese market increased rapidly and the sales expenses continued to be invested. By category, the company’s sales revenue of pet snacks, pet cans and PET staple food increased by 15.64%, 52.97% and 115.66% respectively. Among them, PET staple food is basically sold in the Chinese market, which has maintained a rapid growth of more than doubling. The company’s layout in the field of staple food in the Chinese market is effective. Due to capacity constraints, the company’s PET staple food is still partially purchased, which hinders the profitability of the staple food category. We believe that with the production of the company’s 60000 ton staple food project and the gradual release of production capacity, the cost of the company’s PET staple food will be gradually improved. The company continued to invest in the Chinese market, and the annual sales expenses increased by 31.9% year-on-year. The company cooperates with the continuous business promotion and advertising in the peak sales season in China, which reflects the firm confidence of the company to continue to develop the Chinese market.
Convertible bond financing continued to expand production capacity and help the company continue to grow. The company plans to issue convertible bonds to raise 769 million yuan to invest in the project with an annual output of 60000 tons of high-quality pet dry food, the project with an annual output of 40000 tons of new pet wet food, the project with an annual output of 2000 tons of freeze-dried pet food, the intelligent three-dimensional transformation project of plane warehouse and supplement working capital. Considering the construction cycle of production expansion, the company has planned and laid a good foundation for the development of the company in the next 3-5 years, especially in the main grain category of dry and wet grain, which is expected to support the continuous expansion of the company’s free brand in the Chinese market.
Profit forecast and investment rating of the company: we are optimistic about the industry dividend brought by the continuous expansion of the market scale of China’s pet industry, as well as the steady growth of the company’s own business and cash flow. We are optimistic about the company’s continuous channel advantages and brand construction in the Chinese market. Our own brand has long-term development potential. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be 156, 218 and 298 million yuan respectively, EPS will be 0.53, 0.74 and 1.01 yuan, and PE will be 38, 27 and 20 times, maintaining the “strongly recommended” rating.
Risk tip: China’s market expansion is less than expected, raw material price fluctuation risk, exchange rate fluctuation risk, etc.
