I. Overview of events

The company released its mid-2021 report on August 27, with revenue of 477 million yuan during the reporting period,-4.46% compared with the same period last year, and net profit of 124 million yuan, 16.45% compared with the same period last year. Q2 realized revenue / return net profit of 2.23 billion yuan in a single quarter, compared with the same period last year. 37.64%, respectively.

II. Analysis and judgment

Lactic acid bacteria drinks declined slightly, and the channel took the initiative to adjust Xu Li.

21H1 realized revenue of 477 million yuan,-4.46% compared with the same period last year, while 21Q2 realized revenue of 223 million yuan,-26.96% of the same period last year.

The decline in income in the first half of the year is mainly due to the recovery of consumer demand than expected, while the company took the initiative to invest more fees for channel adjustment, short-term write-off part of the income. In terms of products, the income of 21H1 lactobacillus drinks / other beverages is 415 million yuan, respectively, which is 62% compared with the same period last year, and that of Q2 is 191 million yuan respectively, which is 54% compared with the same period of last year. The decline of lactic acid bacteria beverages is mainly due to the aging of products, and the company takes the initiative to increase the input of channel resources and write off part of the income. Other drinks benefit from new products such as mineral water and achieve better growth. In terms of different channels, 21H1 distribution / direct sales revenue is 463 million yuan, respectively, compared with the same period last year, the revenue of Q2 is 2.14% / 10 million yuan, and that of Q2 is 2.14% / 10 million yuan, respectively. The larger increase in direct sales is mainly due to the low base of direct sales and the company's expansion of new retail channels. At the same time, the company is also actively arranging community group buying this year. From a regional point of view, the income of 21H1 in East China / Central China / Southwest / South China / North China / Northwest is 2.40, 1.36, 0.36, 0.25, 0.13, 0.09, and 0.07 million yuan, respectively, compared with the same period last year. 5%, 5, 000 In the first half of the year, the company mainly carried out optimization measures for the regions with large growth fluctuations (Northeast, Southwest and East China) to support the development of key areas. In terms of dealers, the number of 21H1 dealers was 1441, a net increase of 5 compared with 2020, of which the number of dealers in Northeast, North China, Central China and Southwest decreased, mainly due to the company's optimization of dealer system.

With the increase of expenses, the performance is under short-term pressure, but the long-term net profit of 21H1 is 124 million yuan,-16.45% compared with the same period last year, while the net profit of 21Q2 is 60 million yuan,-37.64% of the same period last year. The core reason why the growth rate of the profit end is lower than that of the revenue side is that the company invests more channel resources and R & D expenses. We believe that although the active channel adjustment and new product research and development lead to short-term performance pressure, it will also contribute to long-term healthy growth. (1) Gross profit margin: 21H1 gross profit margin is 42.28%, year-on-year-10.52pct (Q2 is 40.47%, year-on-year-12.40pct). On the one hand, it is due to the adjustment of freight to operating costs, on the other hand, it is due to channel charges deducting part of the income. If excluding the impact of freight, 21H1 gross profit margin-7.01ppt. (2) expense rate: 21H1 sales expense rate 11.84%, year-on-year-4.63pct (Q2 12.88%, year-on-year-2.54pct), mainly due to the adjustment of freight to operating costs; management expense rate 6.17%, year-on-year + 2.21pct (Q2 7.50%, year-on-year + 4.51pct), mainly due to the establishment of four new business departments of the company. The R & D expense rate is 0.71%, year-on-year + 0.55pct (Q2 is 1.02%, year-on-year + 0.88pct), mainly because the company cooperates with Jiangnan University to increase investment in product research and development; the financial expense rate is-1.92%, year-on-year + 0.49pct (Q2 is-1.26%, year-on-year + 0.65pct). (3) net interest rate: 21H1 return net interest rate is 26.11%, year-on-year-3.75pct (Q2 is 26.89%, year-on-year-4.61pct). The short-term pressure on profits is obvious due to the increase in channel fees, employee compensation and R & D expenses.

The recovery of the main business leads to the improvement of 21H2 income compared with the previous month, and the cultivation of the second growth curve opens the long-term space. We expect the revenue side of the company to improve in the second half of the year, mainly due to: (1) the main business is expected to pick up: the company actively adjusts its policy in the normal temperature lactobacillus beverage market in the first half of the year, promoting category iteration and expansion on the one hand, and increasing the allocation of channel resources on the other, although it leads to short-term pressure on the However, we believe that the internal adjustment is coming to an end, which shows that the situation of dealers in the core market of East China has improved in the second quarter. It is expected that the potential energy of channel reform will be gradually released in the second half of the year, and the number of dealers will maintain the trend of growth. (2) cultivate the second growth curve: in 2021, the company will launch new products such as room temperature cheese and probiotic functional food, which will enjoy high growth dividend in the industry for a long time. However, at present, the new product is still in the energy storage period, and the short-term contribution performance increment is relatively limited. It is expected that the new product performance dividend will be released quickly after 2022.

III. Investment suggestions

According to the performance of the China report, we adjusted our previous profit forecast. It is estimated that in 2021-2023, the company's income will be RMB 10.20, 12.16, RMB 1.459 billion, compared with the same period last year, which is + 19.8%, 19.1%, and 20.1%, respectively. The net profit from the homing company will be RMB 269,326 million, and the year-on-year net profit will be 2.69%, 20.9%, equivalent to 0.52, 0.63, 0.76 yuan for EPS, and the current share price will be times higher than that of PE, which is equal to the value of RMB 0.52, 0.63, and 20.9%, respectively. The company's valuation is slightly 31 times higher than the average 2021 valuation of comparable companies in the beverage industry (Wind consensus expectations, arithmetic average method), maintaining a "cautious recommendation" rating, taking into account the second growth curve contributed by new categories in the future and the performance growth brought about by the upgrading of old categories and the sinking of channels.

IV. Risk hints

The moving sales of new products are not as expected, the sinking of channels is not as expected, food safety risks and so on.