Event: the company announced its results for 2021, with revenue of HK $8.064 billion during the reporting period, an increase of 131% over the same period last year, and a net profit of HK $717 million belonging to the owner of the company, an increase of 576% over the same period last year. Excluding the income of HK $406 million regarded as the sale of the joint venture, the company achieved a net profit of HK $311 million, an increase of 193% over the same period last year.
Tobacco import and export business picked up significantly, completed the Brazilian business and enhanced the company's overall competitiveness. According to the section, the revenue of tobacco export business during the reporting period reached 2.297 billion Hong Kong dollars, an increase of 19% over the same period last year, with revenue accounting for 28.5%, gross profit margin of 2.73%, and an increase of 0.36pct over the same period last year. The revenue of tobacco import business reached 5.178 billion Hong Kong dollars, an increase of 283% over the same period last year. Tobacco products that were delayed by COVID-19 's epidemic in 2020 arrived in Hong Kong in the first half of 21. At the same time, some tobacco imports from the United States and Canada resumed purchasing tobacco imports. This sector accounted for 64.2% of revenue and 6.1% gross profit margin, an increase of 0.64pct over the same period last year. The revenue of cigarette export business reached 173 million Hong Kong dollars, an increase of 10% over the same period last year, mainly because the company actively seized the opportunity of customs clearance in Zhuhai and Macao, partially restored the duty-free cigarette business in the region, and adopted a more flexible promotion strategy to promote cigarettes with longer inventory. The proportion of revenue in this sector was 2.1%, the gross profit margin was 6.76%, and the 4.1pct declined compared with the same period last year, mainly affected by the continuous downward movement of the demand structure of the duty-free market. The export business of new tobacco products achieved revenue of 102 million Hong Kong dollars, an increase of 165% over the same period last year, mainly due to the company's active expansion of channels, enhancement of upstream and downstream resource coordination, and optimization of sales structure. This sector accounted for 1.3% of revenue, gross profit margin of 3.34%, year-on-year improvement of 0.6pct, profitability basically remained stable. The Brazilian business is the consolidated accounting for the company after completing all the issued and issued quotas in Brazil, with an income of HK $315 million, accounting for 3.9% of revenue and a gross profit margin of 16.3%. We believe that the company is the international business development platform designated by China National Tobacco Corporation and the exclusive operating entity of related trade business. with the gradual control of the epidemic, the company's tobacco import and export business income has been greatly increased in the past 21 years. The company's business sectors are expected to continue to achieve high-quality growth steadily. At the same time, the company completed the acquisition of China Tobacco Brazil in November 21, further expanding and deepening the layout of the industrial chain, and enhancing the overall bargaining power and profitability.
The company is expected to continue to explore integration opportunities related to the industrial chain in the future, including the acquisition of overseas tobacco products operating entities, upstream tobacco products production and processing entities, etc.
The company's business model has outstanding advantages and strong scarcity.
Scarcity advantage: China Tobacco Hong Kong has the exclusive right to operate the relevant tobacco international business. According to document No. 60 of China National Tobacco Corporation, China Tobacco Hong Kong is the exclusive operating entity designated by China National Tobacco Corporation to engage in international business development platform and related trading business. We believe that this "exclusive status" is relatively rare and may continue to benefit from overseas expansion and equity mergers and acquisitions of China Tobacco in the future.
Business model advantages: steady cash flow, strong bargaining power. The company relies on China Tobacco Group, and its income has increased steadily in recent years; at the same time, due to the existing pricing policy, the gross profit margin of each business is less volatile and has higher anti-risk ability; business model and license advantages determine that the company has stronger bargaining power and better cash flow; overseas tobacco brands and channels may be acquired in the future to enhance competitiveness.
Profit forecast and valuation
We believe that the company relies on China Tobacco Group and has significant advantages in barriers, which is the only international business platform under the flag of China Tobacco at present, and is expected to be the direct beneficiary of the development and reform of China's tobacco industry. Due to the completion of the merger of the main body of the business in Brazil, we raised the company's annual revenue to HK $114.5757150.11max 197.95 (the previous value of 22max 23 was HK $105.53max 137.38) in 22-23-24, and the net profit was HK $4.96ppm (the previous value of 22max 23 was HK $457ap618). The company is the only international business platform in the tobacco system and is given a "buy" rating.
Risk hints: policy change risk, sales below expectations, new tobacco development less than expected, M & An integration risk