The company's income / return net profit in the first half of the year increased by 65% to 390 million / 36 million yuan. in the same period last year, the company was hit by the epidemic, and the company's performance base was relatively low. this year, the demand for catering, tea and other products warmed up to drive up the company's condensed milk product demand, thus pushing up the company's performance in the first half of the year. The company is currently accelerating the expansion of channels in East China and other regions outside South China, and it is expected that the subsequent commissioning of Cangnan and Jiyang Phase II projects will double the company's production capacity and effectively support the company's short-and medium-term performance growth.

2021H1, the company's income / return net profit increased by 65% by 222% to 390 million / 36 million yuan. 2021H1, the company realized operating income of 390 million yuan (+ 65.5%), net profit of 36 million yuan (+ 222.4%), and non-return net profit of 29 million yuan (+ 228.3%). Among them, 2021Q2 realized income of 190 million yuan (+ 34.2%), net profit of 22 million yuan (+ 100.7%), and non-net profit of 15 million yuan (+ 74.5%).

The recovery of catering channels compared with the same period last year led to a pick-up in the performance of the In the first half of the year, the company's concentrated dairy products / dairy trade revenue increased by 52.1% from 75.7% to 220 million / 1.50 yuan. the revenue of the direct marketing channel of concentrated dairy products was 18 million yuan (- 30.2%). The distribution channels based on catering, baking, tea, household consumption and other needs achieved revenue of 215 million yuan (+ 72.9%). The year-on-year increase in revenue from distribution channels is mainly due to the impact of the epidemic in the same period last year on the catering industry, while this year's catering industry has obviously picked up year-on-year, while the company began to strengthen the development of condensed milk terminals for catering, beverage and baking channels since last year. In the first half of the year, the company's sales of concentrated dairy products increased by 52.7% to 12000 tons (compared with 18000 tons of H2 last year), and the growth rate was basically the same as that of income.

Channel situation: stabilize the regional foundation of East and South China, accelerate the expansion of other regions such as North China, and online channels are still in the training stage. East China and South China are the most important markets for the company's products. 2020H1 has revenue of 93 million yuan (+ 51.6%) in East China and 50 million yuan (+ 53.7%) in South China, with gross profit margins of 35.8% to 35.8% respectively compared with the same period last year. 35.3%. In addition, the company is accelerating the layout of other new regions, with revenue of 16 million yuan (+ 123.0%) in North China and 58 million yuan (+ 137.6%) in other regions, with gross profit margins from + 7.5pcts/ + 9.2pcts to 29.5% and 38.6% respectively compared with the same period last year. At the end of 2021H1, there were 12 dealers (43 more and 31 less) than at the end of 2020, including + 6 /-1 / + 7 in East China / South China / other regions respectively. During the reporting period, the company's online channel revenue of 497000 yuan, is still in the cultivation stage.

Last year's low base led to a year-on-year increase in gross profit margin, and rates were optimized during the period. In the first half of the year, the company's gross profit margin increased to 25.6% year-on-year, compared with a low gross margin of less than 22% in the same period last year, compared with no less than 28% in the previous four years. During the reporting period, the company's sales / management / finance / R & D rates were year-on-year + 0.2/-0.9/-0.8/-0.4pct to 9.0%, 4.2% to 9.0%, respectively. During the promotion period, the rates were also reduced from 1.8pcts to 15.2pcts. The increase in sales rates was mainly due to the increase in sales staff, the increase in freight due to the increase in sales volume, and the increase in advertising expenses.

Risk factors: food safety problems; intensified market competition; new products & new market development is not as expected; raw material price fluctuation risk.

Investment suggestion: considering that the company's profitability rebounded more in the first half of the year, better cost control, and accelerated expansion of new regional products, we adjusted the company's 2021 EPS forecast to 0.73 yuan (original forecast 0.67 yuan), maintaining the 2022 EPS forecast of 1.00 yuan, the new 2023 EPS forecast of 1.19 yuan, the current price corresponding to PE in 45-33-28. With reference to the average valuation of 30 times PE in the same industry, and considering that the company has a certain valuation premium as new shares, give the target valuation level of 35 times PE next year, corresponding to the target price of 35 yuan, and maintain the "overweight" rating.