Ten months ago, one day in early March 2021, Guotai Junan Securities Co.Ltd(601211) securities released a research report entitled “the sky is high and the sea is broad, and the taste spreads to China — Sichuan Teway Food Group Co.Ltd(603317) (603317. SH) first coverage report”.
In this research report, Guotai Junan Securities Co.Ltd(601211) securities predicted that the net profit attributable to the parent company in Sichuan Teway Food Group Co.Ltd(603317) 2021 could reach 538 million yuan, so the target price given to Sichuan Teway Food Group Co.Ltd(603317) was 68 yuan, and the stock price was 57.65 yuan at that time.
However, since the release of the research report, Sichuan Teway Food Group Co.Ltd(603317) has never touched 68 yuan, but has fallen all the way, with the lowest falling to 19.90 yuan on August 31 (the resumption price is about 24.13 yuan).
On January 24, 2022, Sichuan Teway Food Group Co.Ltd(603317) known as the “leader of the composite condiment industry” announced that the company expects to achieve an operating revenue of 2.026 billion yuan in 2021, a year-on-year decrease of about 14.34%; The net profit attributable to the parent company is expected to be 179 million yuan, a year-on-year decrease of about 50.96%.
Why did Sichuan Teway Food Group Co.Ltd(603317) as the industry leader experience a sharp decline in performance and hundreds of billions of industry outlets fly away in this compound condiment industry called “early growth and high scenery” by securities companies?
performance collapse
Sichuan Teway Food Group Co.Ltd(603317) is a large-scale Sichuan flavor compound seasoning production enterprise dominated by hot pot bottom and Sichuan cuisine seasoning. It is one of the two leading compound seasonings in China.
Its products are divided into two brands and five series, namely hot pot seasoning, Sichuan seasoning, sausage and bacon seasoning, chicken essence, spicy sauce and sweet noodle sauce.
Hot pot seasoning and Sichuan seasoning are the two fist products of its operating revenue.
In the two years before listing, Sichuan Teway Food Group Co.Ltd(603317) developed rapidly. In 2019 and 2020, it achieved operating revenue of 1.727 billion yuan and 2.365 billion yuan respectively, and net profit attributable to parent company of 297 million yuan and 364 million yuan.
However, in the first half of 2021, Sichuan Teway Food Group Co.Ltd(603317) suddenly broke the news of performance decline, and the semi annual performance decreased by 62.11% year-on-year.
According to the Research Report of Everbright Securities Company Limited(601788) , the main reason for the decline in the performance of Sichuan Teway Food Group Co.Ltd(603317) semi annual report is that “the increase of promotion affects the gross profit margin, and the investment of marketing expenses drags down the net profit”. At the same time, the forecast of Sichuan Teway Food Group Co.Ltd(603317) net profit in 2021 is lowered to 316 million yuan.
Who would have thought that by the evening of January 24, 2022, the performance forecast disclosed by Sichuan Teway Food Group Co.Ltd(603317) showed that its net profit in 2021 was only 179 million yuan, less than 60% of the predicted value of Everbright Securities Company Limited(601788) .
As for the performance in 2021 not meeting expectations, Sichuan Teway Food Group Co.Ltd(603317) believes that there are four reasons, which are “1) the decline of residents’ consumption power and the sales revenue is lower than expected; 2) the rise of the cost of main raw materials; 3) the change of product structure and the decline of gross profit margin; 4) the intensification of industry competition and the increase of promotion.”
What kind of product structure has changed, leading to the decline of gross profit margin?
On January 25, the reporter of 21st Century Business Herald sent an interview email to Sichuan Teway Food Group Co.Ltd(603317) , but he didn’t get a reply by the time of publishing.
According to the latest research report on January 25, Sichuan Teway Food Group Co.Ltd(603317) the net interest rate in 2021 is expected to be 8.82%, down 6.6pct year-on-year, “It is mainly due to the rising cost, structural changes and the decline in income. The company’s Q4 promotion policy shrinks, the gross profit rate increases slightly, and the advertising investment decreases month on month. At the same time, government subsidies and investment income contribute to the profit, and the profit side achieves a large increase under the low base.”
If we simply look at the fourth quarter of 2021, Sichuan Teway Food Group Co.Ltd(603317) the net profit attributable to the parent company in a single quarter is about 99 million yuan, which is significantly higher than 44 million yuan in the fourth quarter of 2020. However, Sichuan Teway Food Group Co.Ltd(603317) the operating revenue in the fourth quarter of 2021 is expected to be about 630 million yuan, down about 25% from 840 million yuan in the fourth quarter of 2020.
Fu Rong, a researcher at Guosheng securities, believes that this data is slightly lower than market expectations. “It is expected that it is mainly due to the shortage of logistics and upstream packaging materials and the dislocation of delivery.”
is the air outlet still in the industry?
Compound condiment is a “new track” in the condiment market in recent years, which is mainly subdivided into sub industries such as hot pot seasoning, condiment sauce, Chinese compound, western compound and so on.
According to the data, the scale of China’s composite condiment industry continued to expand from 55.7 billion yuan in 2013 to 148.8 billion yuan in 2020, and the CAGR in the past seven years was about 15.07%.
According to Frost & Sullivan data, it is estimated that by 2023, the scale of China’s composite condiment market will reach 245.1 billion yuan, and the industry scale CAGR will reach 16%, significantly exceeding the growth level of the condiment industry.
“The growth rate of the compound condiment industry is still quite fast, with an annual growth of about 15%, but the scale of this industry is about 150 billion a year.” A private equity fund source in Shanghai told the 21st Century Business Herald that the characteristics of the compound condiment industry are “scattered and small”, “customers have no brand loyalty, and the head enterprises have no obvious scale effect. They belong to an industry that ‘looks beautiful’.”
In his opinion, if the compound condiment enterprises want to develop rapidly and seize the market, they have to spend money on the layout of channels and brands, “but this will increase costs and eat profits, just like Sichuan Teway Food Group Co.Ltd(603317) , resulting in the decline of performance and stock price.”
In the first half of last year, Sichuan Teway Food Group Co.Ltd(603317) once admitted that “the company’s performance in the first half of the year was greatly affected by the fact that the recovery of terminal consumption was not as expected, the impact of factors such as high base, high inventory and high cost, and the insufficient evaluation and demonstration of the impact of the epidemic and post epidemic era.”
However, the compound condiment industry is still favored by securities companies.
China Industrial Securities Co.Ltd(601377) according to the research report, three dimensions determine that compound condiments are a profitable track: “1) the endowment of condiment attributes leads to high gross profit margin. 2) the development of chain catering weakens the regional barriers of taste and is easy to incubate national demand. 3) the demand is highly granular and the single product is easy to be sold quickly in the short term, that is, it enters the period of rapid improvement of income and profit.” eight
Moreover, China Industrial Securities Co.Ltd(601377) believes that compound condiment is a subdivided field with fast growth and large long-term space in the condiment industry. The development of the industry is still in the early stage, there is no significant leader, and there is no obvious scale effect for leading enterprises nationwide. Enterprises can obtain rapid growth of income and profits by virtue of large-scale production of a single category. At present, enterprises in the field of hot pot and Chinese seasoning will have certain first mover advantages. It is suggested to pay active attention to Yihai International (01579. HK), Sichuan Teway Food Group Co.Ltd(603317) , and Qingdao Richen Food Co.Ltd(603755) (603755. SH).
brokerage analyst YY Mengxing
Under such a good expectation background, Sichuan Teway Food Group Co.Ltd(603317) handed over a “report card” that did not meet the expectation in 2021, which led institutional investors to choose to significantly reduce their holdings of the stock in 2021.
Funds such as GF Jufeng, GF new economy, Changxin domestic demand growth, e-fund medium and small cap, e-fund value growth and other funds originally held Sichuan Teway Food Group Co.Ltd(603317) in the first half of 2021 withdrew from the top ten circulating shareholders of the company after the third quarterly report, leaving only Jingshun Great Wall emerging growth, which is in the charge of Liu Yanchun Jingshun Great Wall Dingyi and Jingshun Great Wall domestic demand growth fund 2 also held Sichuan Teway Food Group Co.Ltd(603317) in the third quarterly report of last year.
Since Sichuan Teway Food Group Co.Ltd(603317) has not disclosed the annual report of 2021, it is impossible to know whether the three funds under Liu Yanchun still hold the shares.
The sharp reduction of institutional holdings also directly led to the sharp decline of Sichuan Teway Food Group Co.Ltd(603317) share price, which has fallen for more than a year.
According to the data, the stock price of Sichuan Teway Food Group Co.Ltd(603317) has fallen from the closing price of 82.24 yuan on December 31, 2020 to 26.81 yuan on December 31, 2021 (the resumption price is about 32.42 yuan), a decrease of more than 60%, and the market value has evaporated about 31.6 billion yuan within one year.
In 2022, Sichuan Teway Food Group Co.Ltd(603317) still hasn’t stopped falling. On January 25, the stock fell to 21.81 yuan, down 18.65% this year.
In fact, not only Sichuan Teway Food Group Co.Ltd(603317) , the share price of Yihai international, another leading enterprise of Chinese compound condiment, also fell 68.65% in 2021.
Although Sealand Securities Co.Ltd(000750) once included Sichuan Teway Food Group Co.Ltd(603317) in the prefabricated vegetables section on May 30 last year, Sichuan Teway Food Group Co.Ltd(603317) replied to investors on November 10 last year, “the company is not involved in the field of prefabricated vegetables at present.”
However, Fu Rong, a researcher at Guosheng securities, believes that after nearly a year of channel inventory cleaning, the current channel inventory of Sichuan Teway Food Group Co.Ltd(603317) has been cleaned up to a benign level. At the same time, according to grassroots research, the age of terminal products has also been significantly narrowed. “We expect that with the recovery of C-end demand, the reform dividend is expected to be gradually released after the company adjusts its products, channels and internal organizational structure. Under the background that the recovery logic of b-end and C-end remains unchanged and the long-term penetration space needs to be improved, we believe that the re adjustment industry has a wide space. It is expected that the industry is still expected to maintain a double-digit growth of 10-15% in the next 3-5 years. As an industry developer, the company The leaders of the exhibition actively carry out capacity layout and category expansion, which is expected to maintain the growth level beyond the industry and be optimistic about its long-term development space. “
