Event

The company issued a performance announcement: the company's total operating income was 36.13 billion yuan, an increase of 25.44% over the same period last year; the total profit was 264 million yuan, an increase of 711.22% over the same period last year; and the net profit belonging to the parent company was 257 million yuan, an increase of 323.91% over the same period last year.

Comment

With the continuous upgrading of the business structure, the brand operation business is expected to become a new profit growth point. 2021H1 Yatong's annual operating income is 36.097 billion yuan (+ 25.62%), and the company's net profit is 257 million yuan (+ 323.91%). The substantial increase in 202H1 net profit may mainly come from the investment income superimposed by the elastic release of brand operating profits brought about by the closure and conversion of project companies with weak profitability and large capital consumption. From the perspective of specific business structure, distribution + marketing-achieved total operating income of 34.063 billion yuan, an increase of 21.95% over the same period last year, accounting for about 95% of the main business income, which is the company's main source of income. specifically, 21H1 communications and industrial raw materials grow rapidly (95.46% and 133.16% respectively), while mothers and infants and household appliances, which account for the highest proportion of income, achieve steady growth. Brand operation-achieving a total revenue of 1.627 billion yuan, one of the important sources of performance increment is the newly increased gross profit brand operating category in the first half of the year (Hongxing 1949, Baiao Benji, Xiangnaluer, Milk Xiansen and other well-known brands). Among them, the liquor brand operation business, which accounts for 34.11% of the brand operating income, contributed 63.01% gross profit, which is an important driving force for the profit end. The price of enamel color per ton of large items in Diaoyutai has been raised (price increase + structure upgrade). Since the company launched the brand operation business in 2019, the business structure has continued to upgrade. As the gross profit margin of the brand operation business is much higher than the overall gross profit margin of the company, it is expected to become a new profit growth point of the company in the future.

The bottom of profitability has passed, cost control helps the net profit margin to rebound, 2021H1's gross profit margin is 6.05% (+ 0.39pct), net profit rate is 0.59% (+ 0.51pct), gross profit margin and net profit margin have rebounded since the bottom, mainly due to the continuous improvement of business structure, organizational structure and management refinement, the company's excellent operating efficiency, and the management expense rate decreased by 0.60 percentage points to 2.02%. We optimized the financing structure and effectively reduced financing costs, and the financial expense rate decreased by 0.93% to 1.93%. In terms of sales expense rate, the sales expense rate of 2021H1 increased by 0.71% to 1.43% over the same period last year. In addition, since the beginning of this year, the company has adhered to the "zero inventory" platform operation model, reducing the company's debt ratio through capital recovery and capital operation; by divesting the joint ventures with inefficient operating funds in the past 380 platforms, reducing the operational risk and optimizing the financing environment. 2021H1's interest expenses decreased by 102 million yuan, ROE increased by 3.19%, and the net operating cash flow was 1.428 billion yuan, an increase of 807.85% over the same period last year.

The business model will continue to optimize, and the strong profitable performance of 21Q1-3 is expected to continue in the second half of the year: 1) continue to lay out consumer goods races; 2) vigorously promote the upgrading of business models and constantly improve brand operation capacity; relying on digital transformation and integration of online platform, it is expected that the proportion of online and offline business of the company in 3-5 years will change from 1:3 to 2) continue the transformation of digital intelligence. Under the background of continuously promoting structural adjustment, the increasing proportion of brand operation and marketing business, the continuous growth of absolute income, the optimization of financing structure, and the weak profitability of shutdown and merger, the company expects that the growth rate of homed net profit from January to September in 2021 will reach 370% 420%, and the profit side will continue to have a strong performance.

Change and no change: three years of restructuring and reconstruction, about to break the cocoon into a butterfly

Unchanged: layout the supply chain ecology and create the largest fast consumer O2O distribution platform. With traditional supply chain services and in-depth distribution + marketing business with "380platform" as the core, the company has served more than 2600 domestic and foreign well-known brands and distributed more than 400000 categories of goods. at the same time, it covers more than 1.5 million terminal stores in the country's T1-4 urban market, building the country's largest FMCG O2O distribution platform with all-channel marketing ability. Compared with its competitors, the company's supply chain and distribution service base highlights the advantages of its multi-brand marketing and brand operation enterprises.

Change: three years of restructuring and reconstruction, about to break the cocoon into a butterfly. In the past three years, the company has achieved restructuring and restructuring through business model upgrading and business focus focus: 1) upgrade: business model iterative upgrade to build an integrated two-wing business structure. The company's business model has been upgraded from traditional supply chain business and distribution business to distribution + marketing business as the basic plate, brand operation business as the growth pole model, and put forward the strategy of "one body and two wings" for the first time. In the future, the proportion of the company's online (including new retail) and offline business is expected to change from 1:3 to 2) focus: brand operation + private brand incubation business. The company sets up an open fission marketing platform to continuously empower brand operation through basic supply chain services, distribution partners and channel terminal advantages, so as to obtain higher profits. and establish a consumer industry fund to accelerate the incubation of own brands, realize brand investment mergers and acquisitions, and promote the growth of consumer ecological chain enterprises.

Beyond the expected development point: taking advantage of the trend of soy sauce and wine, the brand operation business is on the rise. Based on the understanding of small B, Big B and C end, the company began to cultivate, empower and operate high-quality brands since 2017, combined with consumption trend reverse accurate selection (C2M), fully tap the potential of the brand, and launch brand operation business in the field of large consumption. Among them, the performance of the liquor sector is outstanding-in 2020, the company's liquor brand operation business, such as Diaoyutai Enamel Color and Guotai Black Gold decade, with less than 5% of revenue, achieved a gross profit of nearly 10%. In 2021, the company will further add a number of exclusive products to enrich the product matrix, in addition to the original large items, summary 12 in the second half of the year is expected to achieve performance thickening, can focus on. Under the fever of soy sauce and wine, it is estimated that the scale will reach at least 4 billion yuan in 2025, and we predict that the liquor sector is expected to have a better-than-expected performance. As the company replicates the successful operation experience of the liquor sector to the fields of small household appliances and medical beauty with higher gross margins, we believe that the brand operation scale of the company can reach 10 billion yuan in 23-25 years, and the profit side can be expected.

Profit forecast and valuation

We believe that Yatong will benefit from the steady development of the basic plate, the accelerated development of high-margin brand operation business, and the gradual divestiture and fixed growth of the project. It is estimated that the income growth rate from 2021 to 2023 will be 15.4%, 12.5% and 11.8% respectively; the net profit growth rate of home will be 303.8%, 42.6% and 40.4% respectively, and the PE will be 32,22 and 16 times respectively. Long-term performance growth is strong, the current valuation is cost-effective, maintain the buy rating.

Catalyst: consumption upgrading continues, and the introduction of high-priced products is smooth.

Risk tips: the second outbreak of the domestic epidemic affects the overall dynamic sales of spirits; the dynamic sales of high-end spirits are not as expected; financial problems; the risk of management change.