Event

According to KuaiBao, the operating income of 2021 company was 71.228 billion yuan, an increase of 4.35% over the same period last year; the net profit of home was 512 million yuan, an increase of 314.95% over the same period last year; the net profit of non-parent was 513 million yuan, an increase of 533.89% over the same period last year, turning a profit; the operating income of 21Q4 was 18.094 billion yuan, down 26.45% from the same period last year; and the net profit of home was 97 million yuan, an increase of 129.79% over the same period last year Deduct 107 million yuan of non-return net profit and turn losses into profits. In addition, the company recently issued a stock option incentive plan, which is expected to further stimulate the vitality of management.

Comment

The bottom of profitability has passed, the contribution of brand operation business to high profit elasticity, the company's performance in 2021 is in line with expectations, and the profit side has excellent performance, or it may mainly come from: 1) the growth of operating income of the company, while vigorously promoting the adjustment of business structure, the proportion of brand operation and marketing business continues to increase, and it is expected that the net profit of alcohol brand operation business may reach 40%. 2) the investment income brought by the continuous closure and conversion of the project companies with weak profitability and large capital occupation; 3) the company completed the non-public offering of new shares in July 2021, optimized the financing structure and effectively reduced the financing cost. In terms of brand operation, new products with high gross margin are one of the sources of performance increments in 2021 (Abstract 12, Hongxing 1949, Datang Secret works, Bai ao Ben Collection, Xiangna Lour, Milk Xiansen, etc.). At the same time, the color tonnage price of Diaoyutai enamel has been increased (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 arrival of the stock option incentive plan is expected to further stimulate vitality. On the evening of February 24, the company announced the launch of the 2022 stock option incentive plan. Specifically: 1) quantity: the total number of stock options to be granted to the incentive object is 77.91 million, accounting for about 3.00% of the company's total share capital of 2.597009091 billion shares at the time of the announcement of this incentive plan. 2) object: the total number of incentive targets granted under this plan is 182. including company directors, senior managers, middle and senior managers and core backbone personnel, etc. 3) Grant price: the exercise price of the stock option granted under this plan is 5.49 yuan per share; 4) the exercise arrangement: the 123rd exercise period is 40%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30%, 30% 5) performance assessment: the stock option exercise rights granted by this incentive plan shall be assessed in three fiscal years from 22 to 24, once in each fiscal year, with the achievement of the performance evaluation target as one of the conditions for the exercise of the incentive object in the current year. The assessment targets for the 123rd exercise period are: net profit: net profit not less than 100 million yuan in 6-8-10; non-recurrent income: not more than 30%, 30% and 30% of net profit.

We believe that: 1) the goal of the equity incentive plan can be achieved or is expected to further stimulate the vitality of the company. According to the calculation of the incentive target, the growth rate of net profit in 22-25 is expected to be at least 10%, 33% and 25%, with a high probability of achieving the goal. 2) the company's brand operation business (soy sauce-related business) will continue to contribute to high profit flexibility and have strong potential. 3) the bottom of profitability has passed, and cost control helps the net interest rate to pick up. 4) the business model continues to optimize, and the company's profit side continues to perform strongly.

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 brand potential, 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, achieved nearly 10% gross profit with less than 5% of the revenue. In 2021, the company will add a number of exclusive products to enrich the product matrix. In addition to the original large items, summary 12 launched by 21Q3 has begun to thicken the performance, which can be paid more attention. 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 performance than expected. 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 4.4%, 7.9% and 8.1% respectively; the return net profit growth rate will be 314.9%, 39.6% and 29.2% respectively; the PE will be 0.2,0.3,0.4 yuan per share respectively; and the EPS will be 26,18 and 14 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.