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Yasui Food (603345): Revenue significantly improved month-on-month, short-term fluctuations in profits do not change the company’s core value

24/03/2020

Yasui Food (603345): Revenue significantly improved month-on-month, short-term fluctuations in profits do not change the company’s core value

Investment Highlights Performance Summary: The company released its 2019 interim report and achieved revenue in the first half of the year23.

400 million (+19.

9%), net profit attributable to mother 1.

6.5 billion (+ 16%), net of non-net profit1.

500 million (+20.

7%); of which 18Q2 achieved revenue of 12.

400 million (+25.

1%), net profit attributable to mother is 10,000 yuan, +10 in ten years.

9%, deducting non-net profit of 89.56 million yuan (+ 19%).

  Q2 income resumed high growth, and the adjustment effect was obvious.

Q1 revenue growth was only 14.

The root cause of the slower growth rate was 6%, which was due to the impact of the swine fever event on part of the production capacity and the adjustment of the product structure. Sales in Q2 improved and returned to 25.

With a normal growth rate of 1%, the effect of category adjustment is obvious.

1. In terms of categories, the income of noodles, meat products, surimi products, and substitute products is 6 respectively.

400 million (+25.

6%), 5.

900 million (+4.

9%), 8.

700 million (+23.

7%), 2.

200 million (+35.

5%), affected by swine fever, the company proactively adjusted the product structure, reduced pork-based meat products, increased the production and sales of noodle products, egg dumplings, frozen tempura products, and the tilt products were goodGrowth performance.

2. In terms of different channels, the distributors, supermarkets, specialcoms, and e-commerce companies realized revenue19.

800 million (+22.

5%), 2.

900 million (+ 2%), 48.26 million yuan (+16.

8%), 9.8 million yuan, the channel structure is in line with the company’s channel strategy of “mainly catering distribution channels, supplemented by commercial and e-commerce channels,” the company’s net increase of 48 dealers in the first half of 662, the dealer team continued to strengthen.
3. From a regional perspective, the Northeast, North China, East China, South China, Central China, Northwest, and Southwest regions have achieved income 2 respectively.

4 billion (+48.

9%), 2.

600 million (+40.

5%), 12.

800 million (+12.

8%), 1.

8 billion (+13.

2%), 200 million (+28.

2%), 58.67 million yuan (+12.

3%), 1.16 billion (+12.

3%). The high growth in North China and Northeast China is due to the increase in the production capacity of the Liaoning plant. The continued sinking of the channel has led to increased market demand and higher growth in all regions.

  The cost-bearing gross profit margin has been reduced, and the expense rate control is reasonable.

1. H1 gross profit margin is 25.

5%, slightly decreased by 1 every year.

16pp. Reasons: 1) Affected by swine fever, the price of raw materials such as pork and chicken rose. Although the company adjusted its product structure in time and increased the price accordingly in the last 12 months, it could not complete the impact of rising costs.

2) The growth rate of flour products with slightly lower gross profit margins is faster.

2. The company has always maintained better expense control. During the period, the expense ratio decreased year by year, and the H1 sales expense ratio was 12.

02%, down by 1 every year.

12pp, management expense ratio 4.

06%, a decline of 0 per year.

25pp, financial expense ratio is 0.

36%, ten years +0.

25pp, mainly due to interest expenses on convertible bonds and short-term income.

The overall cost rate is 16.

44%, down by 1 every year.

13pp, roughly reducing the impact of rising gross profit margins, the final H1 net profit margin is 7.

07%, a slight decrease of 0.

24pp.

  Issuing convertible bonds to expand production capacity, short-term profit fluctuations will not change the company’s core value.

1. The company’s previous convertible bonds were reorganized by triggering compulsory redemption clauses to restructure all the converted shares. Considering the company’s subsequent Central China and North China factory construction still needs to pay pleading funds, the company intends to issue convertible bonds not exceeding 900 million US dollars for subsequent production capacityConstruction to ensure continuous release of production capacity.

2. Due to the swine fever incident that caused the pork price to rise, the company used imported pork to raise costs in order to ensure food safety. Cost disturbances may affect the company ‘s profit performance in the short term, and its performance will be under short-term pressure, but it will not affect the company’s intrinsic value.

3. The company’s long-term growth logic is clear: 1) Traditional business: Consumption upgrades drive demand for mid-to-high-end hot pot ingredients / noodle products + offsite expansion to seize market share and open up incremental market space. In the next three years, the company’s product demand will continue to be high and production capacity will haveProtection.

2) Quick-frozen breakthrough business: The company’s quick-frozen food platform advantage has been established, relying on the existing huge channels to cultivate new categories, and occupy a place in the huge food and beverage market.

3) Under the environment of rapid industry growth, it is more conducive to leading and outstanding, the most efficient leading companies harvesting market share. At present, the share of Anjing City has only increased by 10%. It is optimistic that the market share of leading enterprises will increase to more than 20%.The net profit margin increased simultaneously.

  Earnings forecasts and investment advice.

The EPS is expected to be 1 in 2019-2021.

4 yuan, 1.

79 yuan, 深圳桑拿网 2.

28 yuan, net profit attributable to mothers will maintain a compound growth of 25% in the next three years, maintaining a “buy” rating.

  Risk warning: raw material prices may fluctuate significantly, and food safety risks.