\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 872 Jonjee Hi-Tech Industrial And Commercial Holding Co.Ltd(600872) )
The condiment industry has entered the threshold of 5 billion yuan
Jonjee Hi-Tech Industrial And Commercial Holding Co.Ltd(600872) was founded in 1993. At present, the company’s business includes seasoning food, park operation and urban development. The main business of focusing on seasoning accounts for more than 96%. In fact, the controller is Yao Zhenhua of Baoneng group, with a shareholding ratio of 20.6%. The revenue increased from 960 million yuan in 2009 to 5.12 billion yuan in 2021, with a CAGR of 15% in 12 years. The net profit attributable to the parent company increased from 70 million yuan in 2009 to 740 million yuan in 2021, with a CAGR of 22% in 12 years. From 2015 to 2021, the company’s gross profit margin basically remained above 35%. In 2021, it was greatly affected by the epidemic and fell to 34.9%, which was at the midstream level in the industry.
The development space of the industry is large, and the concentration is expected to continue to improve
China’s condiment industry has a broad market scale, increasing from 259.5 billion yuan in 2014 to 395 billion yuan in 2020, with a six-year CAGR of 7%. We expect the market scale to reach 550 billion yuan in 2025. In terms of output, the total output of seasoned food of China’s top 100 enterprises increased from 7 million tons in 2013 to 16.27 million tons in 2020, with a CAGR of 13% in seven years. From the perspective of per capita, the per capita retail sales of condiments in China is $15 / person, lower than $150 and $30 / person in Japan and South Korea. In terms of concentration, CR3 and CR10 of Chinese condiments are about 14% and 25%, which are far lower than those of South Korea, Japan and the United States, with CR3 of 32%, 18% and 15% and CR10 of 60%, 30% and 28% respectively.
The retail sales of soy sauce industry increased from 41.1 billion yuan in 2012 to 87.4 billion yuan in 2020, with a CAGR of 10% in 8 years. It is expected to reach 130 billion yuan in 2025. In terms of output, from 5.96 million tons in 2010 to 13.44 million tons in 2020, the 10-year CAGR is 8.5%. In 2020, the retail price of soy sauce in China was about 6505 yuan / ton. From 2015 to 2020, the average price CAGR of soy sauce was about 2.5% and the output CAGR was about 5.8%. In terms of concentration, the market share of China’s soy sauce industry (by output) is Foshan Haitian Flavouring And Food Company Ltd(603288) , Jonjee Hi-Tech Industrial And Commercial Holding Co.Ltd(600872) , which are 18% and 4% respectively. CR2 is only about 22%, far lower than that of Japan, which is about 60%. There is still much room for improvement.
Brand + product + channel to build a moat and promote price increase to meet the inflection point
In terms of brand, Meiweixian is a century old brand. In 2010, Meiweixian company was awarded the title of “China Time-honored Brand”. In 2022, Chubang brand won the third place in the category of soy sauce and oyster sauce and the first place in the category of sauce in the “2022 (8th) Chinese customer Recommendation Index (c-nps)”.
In terms of products, the two major brands of Chubang and delicious fresh food develop together, and Chubang focuses on medium and high-end products. The revenue of edible oil and soy sauce accounted for 12.1% and 12.1% respectively in 2017, accounting for 12.1% and 12.1% of that in 20212024, respectively. In addition to the three major categories, the proportion of other condiments such as sauce and oyster sauce will increase to 15% in 2021, and the product matrix will be gradually enriched. The sales volume of soy sauce and chicken essence increased from 335000 and 22000 tons in 2016 to 478000 and 30000 tons in 2021, and the CAGR in five years was 7% and 6% respectively; The sales volume of edible oil increased from 28000 tons in 2018 to 35000 tons in 2021, and the three-year CAGR was 7.6%.
In terms of channels, nationalization continues to advance, with the South / East / Midwest / North accounting for 47% / 22% / 18% / 12% respectively. In 2022, Q1 company has 1748 distributors, with a coverage rate of 92% in prefecture level cities and a development rate of 60% in districts and counties.
Under the scale effect, the gross profit margin of soy sauce, chicken essence, chicken powder and edible oil showed an upward trend. In 2021, the gross profit margin of soy sauce, chicken powder and edible oil were 39%, 42% and 7% respectively. In 2021, the price of more than 70% of products will be increased by 3-10%, with an average price increase of about 5%. It is expected that the terminal price increase will be completed in 2022q2, and the performance is expected to usher in an inflection point in the first half of 2022.
Expand production capacity, expand the territory, peel off real estate and focus on the main business
At present, the company has a production capacity of about 700000 tons, including 500000 tons of soy sauce. In the long-term planning, the soy sauce production capacity is about 7 China High-Speed Railway Technology Co.Ltd(000008) 00000 tons, with a total of more than 1.6 million tons. In addition, the fund-raising project of 3 million tons of delicious condiments in Yangxi will have a total production capacity of about 4.6 million tons.
The company continued to slim down and focus on its main business, stripping off real estate and other businesses. In April 2021, it was announced that Changshu Guorui Technology Co.Ltd(300600) million yuan of shares would be repurchased for equity incentive. As of April 2022, 380 million yuan would be repurchased. With the implementation of the equity incentive scheme, the enthusiasm of employees’ interest binding is expected to continue to improve.
Profit forecast
With the gradual easing of the epidemic, we believe that the demand for condiments is expected to recover in 2022. The company continues to deepen its channels and focus on its main business. It is expected to meet the inflection point after the price increase is implemented. Regardless of the impact of the additional issuance on the company’s performance and share capital, the EPS is expected to be 0.94/1.08/1.23 yuan from 2022 to 2024, and the corresponding PE of the current stock price is 27, 24 and 21 times respectively, maintaining the “recommended” investment rating.
Risk tips
Macroeconomic downside risk, consumption dragged down by the epidemic, intensified industrial competition, less than expected regional expansion, less than expected capacity construction or utilization, less than expected price increase, less than expected stripping of real estate and other businesses, less than expected progress in additional issuance, less than expected debt risk of controlling shareholders, etc.
