2021 results are in line with previous profit forecasts
The company announced its results for 2021: annual revenue of HK $8.064 billion, an adjusted increase of 131.4%, and operating profit of HK $288 million, an adjusted increase of 182.7%. The homing net profit reached 703 million Hong Kong dollars, with an adjusted increase of 562.3 percent (the return net profit is higher than the operating profit mainly due to the one-time income generated by the company's capital operations such as the subject matter acquired during the year, totaling about 511 million Hong Kong dollars). The performance is in line with the company's previous profit forecast, mainly due to the continuous improvement of the company's tobacco import and export business, the rapid growth of new tobacco, and the successful promotion of capital operation. The company also announced its intention to pay a dividend of HK17 cents per common share.
In the last half of the year, 1H21/2H21 revenue reached HK $3.694 billion, with an adjusted increase of 96,000,000, 173.1%, and operating profit of HK $1.55 million, respectively, with an increase of 135.8%, 267.7%.
Trend of development
1. The continuous repair of traditional business, the rapid growth of new tobacco and the smooth landing of capital operation have driven the company's revenue growth. From the perspective of sub-business: 1) the export business of tobacco products: the income increased by about 19%, mainly due to the warming demand in Southeast Asia and other places, and the sales structure continued to be optimized; 2) the import business of tobacco products: the income increased by about 283%. Mainly due to the enhanced control ability of the company's industrial chain, the delayed shipment of tobacco products arrived in Hong Kong in 2020, and resumed the procurement of imported tobacco products from some overseas regions. 3) cigarette export business: revenue increases by about 10%, mainly because the company resumes some duty-free cigarette business and optimizes and adjusts promotion strategies; 4) New tobacco products export business: revenue increases by about 165%. The company actively enhances the collaborative ability of upstream and downstream, expand global sales channels, increase the product development of its own new tobacco brands, etc., driving the sustained and rapid rise of new tobacco business. 5) Brazilian business: revenue increased by about 8182%, mainly due to the acquisition and landing of subsidiary CBT (engaged in tobacco purchasing, sales and export business).
2. Product structure optimization and continuous business recovery boost profit margins. In 2021, the company's gross profit margin increased by 5.52% after adjustment, mainly due to the continuous recovery of tobacco products import and export business, and the continuous optimization of product sales structure to raise the overall gross profit margin level. The net profit margin of home ownership has been adjusted to increase 5.67ppt to 8.72%, the net interest rate has significantly increased mainly due to the one-time income brought about by acquisitions, and the operating profit margin has been adjusted to increase 0.65ppt to 3.58%. Profitability has improved.
3. The development of "epitaxial and endogenous" two-wheel drive, paying attention to the rapid growth and epitaxial integration prospect of the company's new tobacco in the future. We expect that in the endogenous aspect, on the one hand, by strengthening the supply chain capacity, the company will continue to restore the steady growth of tobacco import and export, cigarette export and other businesses, on the other hand, it will increase investment in new tobacco brand construction and product development, and pay close attention to the global new tobacco growth dividend, which is expected to continue to grow rapidly. In terms of extension, the company is expected to actively look for M & A targets that match the group's strategy, give full play to the value of China Tobacco Group's exclusive overseas operation platform, and achieve business innovation and breakthrough.
Profit forecast and valuation
Maintain the 2022 profit forecast of HK $326 million, introduce the 2023 profit forecast of HK $349 million, and the current stock price corresponds to 2022max 31 times Pmax E in 2023, maintaining a neutral rating. It is suggested that we should pay attention to the broad prospect of the future coordinated development of endogenesis and extension of the company as the exclusive overseas operation platform of the China Tobacco Group, and maintain the target price of HK $17.6, corresponding to the 2022max 2023 37bp 35x Phand E, with 22% upside space.
Risk
Trade friction, exchange rate change risk; tobacco consumption downside risk; overseas epidemic recurrence