Event: Nanqiao Food released its 2021 quarterly report. In the first three quarters of 2021, the company achieved operating income of 2.055 billion yuan, an increase of 27.50% over the same period last year, a net profit of 274 million yuan, an increase of 32.56% over the same period last year, and a deduction of 261 million yuan for non-return net profit, an increase of 30.78% over the same period last year. In the third quarter, the operating income was 693 million yuan, an increase of 10.14% over the same period last year, and the return net profit was 78 million yuan, an increase of-9.54% over the same period last year. The non-return net profit was 70 million yuan, an increase of-15.99% over the same period last year.
Costs continued to rise and Q3 profits fell. Q3 revenue reached 693 million yuan, up 10.14% from the same period last year. The third quarter is the traditional off-season of the baking industry, and Q3 revenue growth has slowed down due to weak demand. In terms of profit, 20Q3 gross profit margin / net profit margin was 38.37% / 13.78% respectively, and 21Q3 gross profit margin / net profit margin was 29.95% / 11.33% respectively, falling 8.42pct/2.45pct respectively. The large decline in gross profit margin is mainly due to upward cost pressure, and the prices of major raw materials such as palm oil continue to rise. On the expense side, the Q3 sales expense rate / management expense rate / management expense rate / R & D expense rate is 10.35%, 5.12%, 1.73% and 1.02% respectively, which is-0.11pct/-0.97pct/-2.29pct/-0.64pct compared with the same period last year. Although the sales expenses have increased after the resumption of the exhibition and the increase in personnel costs, the rates have decreased with the increase in revenue.
In the medium to long term, capacity expansion contributes to an increase in the proportion of frozen dough, helping to boost profitability. In 2020, the production and sales rate of all categories of the company is higher than 95%, and the contradiction between supply and demand is prominent. Therefore, the company will upgrade the existing production line and add production line to expand production capacity. After the transformation, it is estimated that the annual oil production capacity of the company will be close to 170000 tons, frozen dough capacity will exceed 14000 tons, and production efficiency will be greatly improved. There is a strong demand for frozen dough downstream, and the company will promote capacity expansion to match demand growth through the commissioning of multi-plant areas. It is expected that the new production line will be put into production in the first quarter of next year. With capacity expansion, the growth rate of frozen dough business will rise to a new level. Frozen dough has a high gross profit margin, and the increase in the proportion of frozen dough will boost the company's profitability after expanding production and boosting sales.
The equity incentive plan binds the interests of shareholders and the company, highlighting the confidence of the company. The company launched the equity incentive plan on October 16, 2021, which intends to grant 4595000 restricted shares to the incentive target, accounting for about 1.08% of the company's total share capital on the announcement day of the draft stock incentive plan. The incentive target includes the company's directors, senior managers, core R & D, technology and business backbone employees, etc., with the first award price of 16.685 yuan per share. The incentive plan sets revenue growth requirements for the fiscal year 2021-2023. With 2020 as the base year, the annual operating income growth rate in 2021-2023 is not less than 25%, 45% and 65%. The purpose of the plan is to further establish and improve the company's long-term incentive mechanism, attract and retain talents, fully mobilize the enthusiasm of core personnel, and stabilize the company's long-term development.
Investment suggestion: based on the good expectation of the industry's high demeanor and the continuous landing of production capacity, we maintain "increasing our holdings".
Rating. With reference to the equity incentive unlocking target, and based on the background of the upward price of raw material costs, we downgrade our profit forecast. It is estimated that the company will achieve a revenue of 29.55 trillion yuan in 2021-2023, with a year-on-year growth rate of 27.3%, 22.6% and 18.3%, respectively. The net profit of returning to the mother is RMB 4.17 million, with a year-on-year growth rate of 28.2%, 24.7% and 26.3%, respectively, and the corresponding EPS is 0.98, 1.23 and 1.55 yuan, respectively, and the annual growth rate is 28.2%, 24.7% and 26.3% respectively.
Risk tips: intensified competition in the industry, raw material prices continue to rise, capacity expansion is not as expected, and so on.