Event

2022Q1 achieved an operating income of 14.094 billion yuan (- 24.61%) and a net profit of 57 million yuan (- 44.59%).

Comment

The epidemic affected the supply chain distribution business / brand operation business, resulting in a significant decline in the performance of 22Q1. The main reason: the company's business is mainly fast consumer goods and other livelihood materials, affected by the domestic COVID-19 epidemic in the first quarter, especially the company's supply chain services, distribution and marketing of the most core node cities (Shanghai, Shenzhen) have taken relevant epidemic prevention measures, resulting in a serious hindrance to the external delivery of the two warehouses. As a result, the company's operating income decreased compared with the same period last year. In addition, as the company is headquartered in Shenzhen and the warehouse is located in Hong Kong, Shenzhen, Shanghai and other places, the epidemic has a great impact on the company's business. Based on the current background of good epidemic control in Shenzhen, 22Q2 is expected to have a strong certainty of performance improvement compared with the previous one. 22Q1 net profit decreased significantly, mainly due to the impact of the epidemic on the operation of soy sauce and wine brands, which accounted for a large proportion of the company's profits, and the higher profit base in the same period last year, resulting in a significant decline in the company's net profit.

The profit side is under short-term pressure, and the expense rate increases slightly.

22Q1's gross profit margin and net profit margin increased by 0.66% and-0.23% year-on-year to 6.86% and 0.28% respectively. During the superimposed period affected by the epidemic, the expense rate increased by 1.13 percentage points year-on-year to 6.75%, of which the sales expense rate and management expense rate changed by + 0.17 and + 0.29 percentage points respectively to 1.87% and 2.27%, respectively. Operating cash flow decreased 83.24% to 124 million yuan compared with the same period last year, mainly due to the decline in the company's business income and the decrease in customer loans and advances in the same period last year. In addition, the company has launched a stock option incentive plan in February 2022, which is expected to further stimulate the vitality of the company.

Be optimistic about the follow-up contribution of soy sauce and wine brand business to profits

Brand operation business is the future development direction of the company. Based on the understanding of Xiao B, Big B and C, the company began to train, 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 liquor sector is outstanding-the company's liquor brand operation business in 2020 through the operation of Diaoyutai enamel color and Guotai Black Gold decade and other items. With less than 5% of revenue and nearly 10% of gross profit, the company will add a number of exclusive products in 2021 to enrich the product matrix. In addition to the original large items, new products such as Abstract 12 and Datang Secret products have been listed, which can be paid more attention to.

Be optimistic about the follow-up contribution of soy sauce and wine brand business to profits. As the main profit of the company comes from the operation business of soy sauce brand, it is considered that: 1) there will be complementary consumption in the follow-up liquor; 2) Yiyatong soy sauce brand matrix will be constantly enriched & layout full price band. 3) at present, the company has achieved control of Datang wine industry (with a production capacity of about 6000t/ years), and Datang Secret Manufacturing, which has a sufficient supply of new products, is expected to start to contribute incremental performance in 22 years. Under the background of the trend of brand sauce and wine is not changed, it is still optimistic about the profit contribution of Yiya Tongjiang wine business in the future.

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 2022 to 2024 will be 4.0%, 11.7% and 7.0% respectively; the return net profit growth rate will be 28.4%, 48.5% and 36.7% respectively; the PE will be 0.2,0.3 and 0.4 yuan per share, and the EPS will be 23, 16 and 12 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.