\u3000\u3000 Eastroc Beverage (Group) Co.Ltd(605499) (605499)
Strong growth in the fourth quarter, driven by two wheels of product channels
According to the performance express, we expect the net profit attributable to the parent company in 2021q4 to be 154 million yuan – 254 million yuan, an increase of 42.6% – 135.2% at the same time. The median net profit attributable to the parent company in 2021q4 was 204 million yuan, an increase of 88.89% at the same time.
The performance in the fourth quarter exceeded expectations mainly for the following reasons: 1) the company continuously optimized the product structure and customer structure, actively strengthened the development of traditional channels in the national market, and further improved the overall market rate and coverage of products; 2) The company actively builds an “energy +” product line to meet the needs of different scenes and people, continuously introduces products that meet differentiated needs, and promotes them through Wuxi Online Offline Communication Information Technology Co.Ltd(300959) multi-dimensional.
Energy drinks continue to grow at a high rate and the nationwide expansion is in progress
The company’s 2021q1-q3 energy beverage revenue was 5.338 billion yuan, an increase of 42% at the same time, accounting for 96.2% from 93.5% in the same period. As the company’s main product, energy drinks continue to maintain a high growth momentum. We expect to maintain a high growth momentum in the fourth quarter.
From a regional perspective, East China, Southwest China, central China and North China are the key areas of the company. The outstanding performance areas of 20221q1-q3 are as follows: the revenue of East China market was 613 million yuan, an increase of 72% at the same time; The revenue of southwest market was 334 million yuan, an increase of 62.14% at the same time; The revenue of central China market was 612 million yuan, an increase of 43.28% at the same time; The revenue of the northern region was 56 million yuan, an increase of 92%. In terms of regional expansion, the company divides the country into four echelons: Guangdong is the first echelon mature market, and Guangxi, Hunan, Jiangxi and Zhejiang are the second echelon; Fujian, Anhui and Henan are the third echelon, and the Great Northwest and northern regions are the fourth echelon. Four different echelons adopt different strategies for network expansion, channel construction and consumer cultivation.
New products enrich the product matrix, and channels sink and expand at the same time
In June 2020, the company launched a new product, Dongpeng Jiaxi, and conducted trial sales in Guangzhou, Foshan and other regions; In April 2021, the new 0 sugar special drink was launched for trial sale in Guangzhou, Zhongshan and other regions, and comprehensively promoted in Guangdong, Guangxi and online channels from June 2021. On December 10, 2021, the company launched “she can”, targeting female target groups. The company continues to promote new products, puts forward the concept of “energy +” and enriches the energy beverage family matrix.
Channel sinking and expansion go hand in hand. From the perspective of Guangdong Province: 1) the development of regional markets is unbalanced, and the sales contribution of the Pearl River Delta will be greater than that of Western and northern Guangdong; 2) In 2022, a catering area will be set up in Guangdong to open up catering channels. In addition to promoting Dongpeng special drink, it will also promote non energy drinks such as orange lemon tea, Chenpi special drink and water; 3) Guangdong is also increasing the penetration of products and the progress of channel sinking, focusing on improving channel coverage and coverage quality. Actively attract investment outside the province, establish an appropriate personnel structure and build a relatively perfect sales system. Effective terminal network development is an important assessment index for the company’s sales personnel. As of October 2021, the company has nearly 5 million terminal networks, which still has a large development space. At present, the company has set up seven production bases in South China, Guangzhou, Dongguan, Haifeng, Nanning, Chongqing and Anhui. In order to optimize the strategic layout of the company, the company has established a Changsha base in Hunan, and Quzhou, Zhejiang, will also be laid out in the future.
Profit forecast
We are optimistic about the new product volume of the company’s energy beverage track and national expansion path. It is expected that the EPS will be 3.32/4.47/5.90 yuan from 2021 to 2023, and the current share price corresponding to PE will be 47 / 35 / 27 times respectively. It will be covered for the first time and given a “recommended” investment rating.
Risk tips
Macroeconomic downside risk, epidemic drag on consumption, online expansion is less than expected, new product volume is less than expected, peak season sales are less than expected, industry competition intensifies risk, and the construction progress of raised investment is less than expected.
