Events. The company disclosed its annual report for 2021 and quarterly report for 2022. In 2021, the company realized revenue of 1.154 billion yuan (YOY12.60%) and net profit of 104 million yuan (YOY-21.14%). In the first quarter of 2022, the revenue was 350 million yuan (YOY17.38%) and the net profit was 28.253 million yuan (YOY-46.67%).

Revenue continued to grow steadily, and the increase in costs / expenses put pressure on profits. For the whole of 2021, at the gross margin, the company's revenue increased by 12.60% year-on-year, and the gross profit margin decreased by 1.79pct, so the gross profit margin increased by 8.43% year-on-year. On the expense side, the period expense rate increased 1.73pct compared with the same period last year, in which the sales expense rate increased 1.17pct compared with the same period last year (mainly due to the year-on-year increase in publicity fees and employee compensation), and the management expense rate increased 0.90pct year-on-year (mainly due to the increase in employee salary). In addition, the income tax rate decreased 3.73pct compared with the same period last year, so the final homing net profit decreased by 21.14% compared with the same period last year, and the corresponding homing net profit margin decreased 3.87pct compared with the same period last year.

In terms of 22Q1, gross profit is up 17.39 per cent year-on-year (while 5.58 per cent higher than 21Q4) and gross profit margin is lower than 5.78pct, so gross margin is up 3.96 per cent from a year earlier. On the expense side, the expense rate increased by 4.95pct over the same period last year (in which the sales expense rate increased by 4.91pct and the management expense rate increased by 0.47pct). As a result, the final homing net profit decreased by 46.67% compared with the same period last year, and the corresponding homing net profit margin decreased by 9.69pct.

Further increase in market share, consolidate the industry first. The scale of the national breakfast oatmeal market in 2021 is lower than that in 2020, and the cold oat category has entered a recuperation period after rapid growth in the past two years, and has declined greatly in 2021. However, the industry still maintains an upward trend in the long run, and COVID-19 is expected to pick up again after the end of the epidemic. In 2021, the company's market share further increased, consolidating the industry's number one market position (14.81% of the market share, according to the company's 21 annual report citing AC Nielsen data), expanding its advantage over major competitors.

With the simultaneous development of new hot food and cold food, the income of compound oatmeal is growing brightly. In terms of products in 2021, the company's pure oatmeal revenue decreased by 1.15% compared with the same period last year, composite oatmeal revenue increased by 51.93%, and cold food oatmeal revenue decreased by 7.94%. (1) in terms of hot food, the company's new hot food oat products made an important contribution to the company's sales revenue in 2021, with annual sales exceeding 100 million yuan, forming a good echelon of oat hot food products. further consolidate the company's first market position in the field of hot oatmeal (market share is close to 20%). (2) in the aspect of cold food, probiotic oats, finger-sucking oats and light food grains are introduced, and a series of products with different tastes are constantly enriched to form a product matrix. In the whole year, the sales of cold food oats reached 135 million yuan, and the sales share entered the top five of the market.

Strengthen R & D marketing and further consolidate the focus on the dominant market. In 2022, the company will focus on building two major business sectors-hot food mixed oats and cold food oats. The former will continue to stabilize and enhance its leading position in the industry, while the latter should give full play to the brand advantages of Ximai and innovate and develop cold oats. The company will strengthen research and development and marketing, and actively build an Internet marketing system. In addition, the company will further consolidate and focus on the superior market, implement the market penetration strategy, start the blank market, adjust the weak market, and implement the market development strategy.

Profit forecast and investment advice. We estimate that from 2022 to 2024, the operating income of the company will be 1.336 billion yuan, the net profit will be 1.27 billion yuan, and the corresponding EPS will be 0.50 yuan, 0.57 yuan, 0.64 yuan per share. Combined with the comparable company valuation, the company is given a PE valuation of 25-30 times in 2022, and the corresponding reasonable value range is 12.50-15.00 yuan per share, which will continue to be rated as "better than the market".

Risk hint. (1) the risk of food safety, (2) the intensification of market competition, (3) the expansion of new products and new channels is not as expected.