\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 882 Shanghai Milkground Food Tech Co.Ltd(600882) )
Key investment points:
Event: the company released the annual report of 2021 and the performance express of the first quarter of 2022. In 2021, the company achieved an operating revenue of 4.478 billion yuan, a year-on-year increase of 57.31%; The net profit attributable to the parent company was 154 million yuan, with a year-on-year increase of 160.60% and earnings per share of 0.33 yuan; The comprehensive gross profit margin of each business segment of the company reached 38.21%, an increase of 2.3 percentage points compared with 2019. The main reason for the increase in the gross profit margin of cheese products. In the first quarter of 2022, the company achieved a revenue of 1.286 billion yuan, a year-on-year increase of 35.23%, and a net profit attributable to the parent company of 74 million yuan, a year-on-year increase of 129.55%.
Comments:
In 2021, the cheese business maintained high growth on a high base. From 2018 to 2021, the company’s cheese revenue achieved a high growth, with an average annual growth rate of 106%. In 2021, on a large sales base, the company’s cheese revenue still maintained a high growth level of 60.77%, and the revenue scale reached 3.335 billion yuan, of which the volume and price contributed 92% and 8% respectively. By quarter, the company’s revenue growth in 20211q, 20212q, 20213q and 20214q was 140.76%, 62.21%, 35.81% and 37.53% respectively. The annual sales growth was high before and low after, and the growth in the third and fourth quarters was less than that in the first and second quarters. In 2022, the company has expanded its products in terms of consumption scenarios and target groups of cheese, and new categories will make efforts in the sales market to drive the “secondary growth” of the company.
We judge that since the second half of 2021, there are several reasons for the slowdown of the company’s income growth: first, the consumption potential of family scenario is far lower than that in 2020. In 2021, the company’s sales volume in family scenes was 351 million yuan, with a year-on-year increase of only 6.31%, which was significantly weaker than the 108.81% increase in 2020. Household consumption still needs the common resource input of the cheese industry. Only by exporting product education to the majority of families for a long time can we cultivate effective household cheese consumption. 2、 The new market investment is concentrated in the third and fourth quarters of 2021, and the new dealers and retail outlets will contribute to sales in 2022. In the second half of 2021, the company’s investment promotion efforts increased: from January to June 2021, the company’s net investment attraction was 709; From July to September, there were 891 net merchants, more than the sum of the first two quarters. In addition, in 2021, the company’s retail outlets increased by 106.47% year-on-year to Shanghai Pudong Development Bank Co.Ltd(600000) , with a large increase. We expect new market resources to contribute to sales in 2022. 3、 The larger the base, the narrower the increase. The company’s cheese sales have reached 3.335 billion yuan. According to the standard that 1 billion yuan is a large single product, the company has promoted three large single products in the cheese industry to the market in just five years, firmly capturing the favor of Chinese children.
In 2021, the gross profit margin of the company’s cheese further increased. We believe that the increase in cheese profit is mainly due to the decline in raw material procurement costs. In 2021, the gross profit margin of the company’s cheese sector reached 51.72%, further improving. Among them, the gross profit margin of ready to eat cheese reached 55.44%, showing a rising trend, with the characteristics of high added value and high profit; The gross profit margin of household cheese is 35.15% and that of industrial cheese is 21.45%. They maintain a fluctuating trend without obvious rise. Cheese has become the company’s core business segment. In 2021, the cheese segment contributed 75% of the company’s revenue and 95% of its gross profit. In the current period, the company’s overseas trade volume increased significantly and the trade cost decreased by nearly 5 percentage points. The purchase cost of main and auxiliary raw materials decreased, so the profit margin of Chinese cheese processing further improved.
For the company, where is the “ceiling” of cheese sales? According to USDA calculation, China’s per capita cheese consumption is only 0.28kg, which is far lower than that of European and American countries with a long history of cheese, and only reaches the consumption level of Japan in 1966 and South Korea in 1995. The Institute of agricultural information, Chinese Academy of Agricultural Sciences predicts that China’s per capita cheese consumption is expected to reach 0.5kg in 2028, and in the long run, China’s per capita cheese consumption is expected to exceed 2kg. In other words, the consumption of cheese in China will increase by 14% to 15% annually in the next five years, and there is still ten times the growth space in the long-term perspective. From the perspective of market penetration, the penetration rate of cheese consumption in cities at all levels is less than 26% to 38%. The market penetration rate is not high, and there is still a lot of room for improvement. We believe that the company’s cheese business still has medium-term growth potential, but the growth trend will converge, and the cheese revenue growth in the next five years will remain at an average level of 25% to 35%. In addition, the competition in the cheese market will intensify, and the centralized market pattern may face competitive challenges. Therefore, the difficulty and resistance of structural upgrading or price increase of cheese products will increase.
In 2021, the company’s trade sector grew steadily, and the raw material procurement was coordinated with the trade agency. On the one hand, it reduced various costs in operation, on the other hand, it reduced the overall procurement cost. In 2021, the company’s international trade volume increased by 106.96% over the previous year, reaching 30600 tons; The annual average trade price decreased by 4.83%; The annual trade income increased by 96.97% over the previous year, reaching 704 million yuan. The overall growth of the company’s trading sector is stable.
In 2021, according to the company’s established strategy, the liquid milk sector continued to shrink. In 2021, liquid milk accounted for 9% of the company’s revenue and 3% of its gross profit. The profit of the sector declined.
The company vigorously promotes new products, and its performance is expected to follow the “second growth curve” to achieve the second round of growth. In 2021, the company launched the “second growth pole”: upgraded versions of low-temperature cheese sticks, normal temperature cheese sticks and “daily cheese” bars in order to achieve “crowd breaking circle” and “Scene breaking circle”. In 2021, the company launched high-end “gold” and “zero addition” low-temperature cheese sticks with higher added value, which will improve the product structure of cheese; The company also launched a normal temperature cheese stick to broaden the eating scene; The company launched the “daily cheese” bar designed for young people, highlighting the fitness concepts of “protein power” and “high calcium power”, which is expected to expand the main consumer group from children to young people and realize “crowd breaking circle”.
In 20221q, the company’s cheese sales continued to increase, and various rates began to decline. The company is moving from scale to benefit stage. In 20221q, the company’s cheese revenue increased by 49.59%, with a month on month increase, and sales regained a strong momentum; The overall revenue increased by 35.24%, and the revenue scale in the first quarter reached 1.286 billion yuan. In the same period, the company’s various expense rates decreased, and the company entered the benefit release stage from scale development: in 20221q, the expense rates of sales, management, R & D and finance were 24.81%, 7.09%, 0.37% and – 1.27% respectively, with a year-on-year decrease of 1.18, 0.59, 0.48 and 1.57 percentage points. With the support of high sales growth and downward rate, the profitability of the company has been greatly enhanced: in 20221q, the gross profit margin and net profit margin were 38.82% and 6.31% respectively, with a year-on-year increase of 0.14 and 2.07 percentage points. In 20221q, the company’s cost pressure increased: the growth of operating cost and operating revenue basically matched, while the annual cost in 2021 was lower than that of revenue, increasing by nearly 6 percentage points.
For 20222q, we believe that the company can successfully achieve its production and sales objectives. As the company has prepared enough safety stocks in advance, the negative impact of epidemic prevention and control in Shanghai and Jilin on production and sales can be minimized. In addition, with sufficient stock in e-commerce channels, the production and sales targets in the second quarter are expected to be achieved.
Investment suggestion: Based on our prediction of the company’s “secondary growth”, it is predicted that the company’s earnings per share in 2022, 2023 and 2024 will be 0.77 yuan, 1.35 yuan and 2.19 yuan respectively, and the corresponding net profit attributable to the parent company will increase by 157.47%, 75.15% and 62.59% year-on-year respectively. Referring to the closing price of 30.06 yuan on April 28, the corresponding P / E ratios are 39.03 times, 22.28 times and 13.7 times respectively. For the company, we maintain the “overweight” rating.
Risk warning: since some production lines of the company are located in epidemic areas (Shanghai and Jilin), the 2022 epidemic will interfere with the production and sales of the company; On May 16, 2022, some restricted shares of the company will be lifted in the secondary market, or cause stock price fluctuations; The company’s new product promotion was less than expected.
