\u3000\u3000 Sichuan Teway Food Group Co.Ltd(603317) (603317)
The company announced the performance forecast for 2021: it is expected to achieve an operating revenue of about 2.026 billion yuan in 2021, a year-on-year decrease of 14.34%, and the net profit attributable to the parent company is expected to be about 179 million yuan, a year-on-year decrease of 50.96%. After deducting non recurring profits and losses, the net profit is about 116 million yuan, a year-on-year decrease of 62.43%. In the fourth quarter of 2021 alone, the company is expected to achieve an operating revenue of 628 million yuan, a year-on-year decrease of 25.24%, and a net profit attributable to the parent company of 99 million yuan, a year-on-year increase of 125%.
Weak consumption dragged down revenue, and the annual performance was under pressure. Affected by the weakness of overall consumption, the company’s revenue fell by 14.34% in 2021. We estimate that the main reason is the decline of hot pot seasoning products, and the consumption demand of sausage and bacon seasoning was driven by the decline of pork price, which achieved a significant increase. In 2021, the annual net profit margin was about 8.84%, a year-on-year decrease of 6.56 PCT, and the deduction of non net profit margin was about 5.73%, a year-on-year decrease of 7.33 PCT, mainly due to: 1) the rise of raw material cost; 2) Changes in product structure; 3) Promotion costs increased.
A number of measures were implemented, and the quarterly profit improved month on month. In view of the rising cost, the company has raised the price of two products in October 2021 and sorted out other products. At the same time, after increasing the promotion and dealer management in the early stage to promote the channel to destock, the terminal inventory has improved significantly in the fourth quarter, the company’s cost investment has returned to normal, the single quarter net profit has increased significantly month on month (Q3 net profit in 2021 was only 4.52 million), the net interest rate has rebounded to 15.76%, and the quarterly profit has improved month on month.
The compound condiment industry has broad prospects, and the enterprise profit is expected to recover under the improvement of competition. Due to cost reduction, standardization demand and the rise of residents’ lazy economy, compound condiments have grown rapidly in b-end catering and C-end consumption. Although the epidemic hit in 2021, we think there is still room for the industry in the long term. In the short term, due to weak demand, more new production capacity and new entrants, and intensified industry competition, the profitability of enterprises has declined. After the excess inventory of channels is cleared, the competition tends to be rational, and the industry is expected to buy back a reasonable profit level.
Categories and channels work together and wait for the inflection point of the company’s operation: as one of the leading enterprises of Sichuan compound seasoning, the company actively expands new categories such as Sichuan Chinese dish seasoning, sausage and bacon seasoning, opens up new customers such as customized meal seasoning in the channel, actively embraces new retail channels such as online e-commerce and community group purchase, and waits for the inflection point of the company’s operation in the future.
Investment suggestion: we estimate that the company’s operating revenue from 2021 to 2023 will be RMB 2.026 billion, RMB 2.932 billion and RMB 3.665 billion respectively, the net profit attributable to the parent company will be RMB 179 million, RMB 298 million and RMB 408 million respectively, the EPS will be RMB 0.28 million, RMB 0.47 million and RMB 0.65 respectively, and the corresponding PE of the current stock price will be 80 / 48 / 35 times respectively. Considering that the recovery of consumption still needs time, it will be lowered to the rating of “prudent recommendation”.
Risk warning: weak consumer demand; Industry competition intensifies; Food safety accidents.
