1-3Q21 performance meets our expectations
The company announced 1-3Q21 results: income 2.713 billion yuan, year-on-year + 26.45%; return to the mother net profit 588 million yuan, year-on-year + 63.58%; deduction of non-return net profit 575 million yuan, year-on-year + 63.78%. The performance is in line with our expectations.
Quarter by quarter: Q1/Q2/Q3 's revenue increased by 10.22%, 44.39% and 31.44%, respectively, and its net profit increased by 33.07%, 208.92% and 16.11%, respectively, compared with the same period last year.
Development trend
1. Income continues to grow rapidly under a low base. The company's 1-3Q21 revenue increased by 26.45% and 3Q21 revenue increased by 31.44%, and the income continued to grow rapidly. we believe that on the one hand, we benefit from last year's low base, on the other hand, it comes from diversified business layout. We expect good growth in business sectors such as medicine bags and big consumption.
2. The cost pressure is great, but the contribution of investment income increases the profit level. The company's 1-3Q21 gross profit margin decreased by 6.0ppt to 31.7% compared with the same period last year, of which 3Q21 gross profit margin decreased by 9.5ppt to 27.6% compared with the same period last year. We expect that this is due to the increase in the price of raw and auxiliary materials upstream on the one hand and changes in the business structure on the other. During the period from 1 to 3Q21, the expense rate decreased by 1.21ppt to 17.57% compared with the same period last year, and the sales / management / finance / R & D expense rate decreased to 4.85% and 8.42% respectively compared with the same period last year. The investment income of 1-3Q21 company also increased by 892% to 365 million yuan, mainly from the contribution of the company's consumer investment fund. Despite the decline in gross profit margin, the company's profitability improved significantly thanks to good cost control and investment income contribution, with 1-3Q21 net profit margin rising 4.9ppt to 21.7% compared with the same period last year.
3. Be optimistic about the development space of the company's new business. In recent years, the tobacco label industry has been adjusted, the company actively layout bags, functional membranes, new tobacco and other new business, we are optimistic about the company's growth space under the new business development. 1) Drug bag: the company has basically completed the preliminary layout of the medicine bag business through the acquisition of Chiba bag, Shoujian bag and Huajian bag, and effective coordination can be formed among the three main businesses. and through the industrial chain integration to provide customers with "design-production-warehousing-logistics" integrated services, the future development space is broad. 2) New tobacco: at present, the new tobacco industry is growing rapidly with the improvement of penetration, the company's layout in the new tobacco industry is in the forefront of the industry, and currently has two new tobacco brands, FreeM and CIGOO. With the policy gradually promoting the standardized development of the industry, we believe that the company's new tobacco business is expected to make a new breakthrough.
Profit forecast and valuation
Keep profit forecasts for 2021 and 2022 unchanged. The current share price corresponds to a price-to-earnings ratio of 12 / 13 in 2022. Maintain an outperform industry rating and a target price of 7.85 yuan, corresponding to 14 times 2021 price-to-earnings ratio and 15 times 2022 price-to-earnings ratio, with 17.9% upside compared to the current stock price.
Risk
The price of raw materials has risen sharply; the expansion of new business has fallen short of expectations.
