\u3000\u3000 Sichuan Teway Food Group Co.Ltd(603317) (603317)
Event: Sichuan Teway Food Group Co.Ltd(603317) released the performance forecast for 2021. In 2021, it is expected to achieve an operating revenue of RMB 2.026 billion, a year-on-year increase of – 14.34%, and a net profit attributable to the parent company of RMB 179 million, a year-on-year increase of – 50.96%. Among them, 2021q4 is expected to achieve an operating revenue of 628 million yuan, a year-on-year increase of – 25.22%, and a net profit attributable to the parent company of 98.46 million yuan, a year-on-year increase of + 123.23%.
Industry demand still needs to recover, and performance is under pressure due to many factors. Under the joint action of many factors such as weak terminal demand and diversion of community group purchase, the company’s sales revenue in 2021 will be affected to a certain extent. The annual net profit attributable to the parent decreased by double digits, and the net profit margin was -6.59pct year-on-year, mainly due to: 1) in order to clean up the channel inventory and promote the healthy development of the channel, the company increased the promotion of free gifts, superimposed the rise in the price of oil raw materials, and the annual gross profit margin decreased; 2) In 2021, the company continued to invest in brand building, H1 sponsored music variety shows and hired brand ambassadors, and the fee investment remained at a high level. Looking at 2021q4 alone, the recovery of terminal mobile sales is still weak, and the revenue has decreased year-on-year. However, thanks to the decline of pork price, the sales of winter seasoning products (sausage and bacon seasoning) are good. We expect Q4 promotion to narrow month on month and realize rapid growth in net profit in a single quarter against the background of low base.
The price increase is expected to improve the gross profit, and the nationwide expansion will continue. In mid October, the company raised the price of two hotpot bottom products under haorenjia, including the price of 228g handmade butter (slightly spicy) by 12.5% and 500g handmade butter (slightly spicy) by 10%. The two products accounted for about 10% of the total revenue. We believe that with the implementation of product price increase, the company’s gross profit margin may be improved to some extent. Based in the southwest, the company is still in the stage of national expansion, and the number of dealers has increased rapidly in recent years. In terms of dealer management, on the one hand, the company strengthens the training of sales personnel and dealers, promotes information construction, improves quality and efficiency; On the other hand, according to individual and local conditions, carry out hierarchical management of dealers, give full play to the role of dealer alliance, and organize sales teams to assist dealers in promoting the implementation of weak markets.
Actively adjust in the face of pressure and expect the company to get out of trouble. On the whole, in 2021, the industry demand was weak and the terminal dynamic sales were slow. Under the great operating pressure, the company actively responded through a number of measures, such as: 1) for the problem of long inventory validity, in addition to increasing the promotion, the salesperson will check the dealer’s inventory every month and put forward reasonable purchase suggestions according to the flow rate and surplus of products; At present, the problem has been improved to a certain extent. With the gradual digestion of channel inventory, the company may be able to pack light in 2022; 2) At the end of September and the beginning of October, the company flattened the organization and disassembled the functions of the strategic market center to improve management efficiency. Looking forward to the future, with the improvement of industry terminal demand and the effectiveness of the company’s adjustment measures, the company is expected to gradually get out of the trough.
Profit forecast, valuation and rating: we maintain Sichuan Teway Food Group Co.Ltd(603317) the net profit forecast for 2021-2023 is 179 / 301 / 397 million yuan respectively, the corresponding EPS is 0.24/0.40/0.53 yuan, and the current share price is 92 / 55 / 41 times PE, maintaining the “overweight” rating.
Risk warning: the dynamic sales of the product is less than expected; Price fluctuation risk of raw materials; Food safety risks.
