Key points of investment:
Incident: The company released its 2021 annual report and 2022 quarterly report. In 2021, the company achieved revenue of 2,165 million yuan, an increase of 7.22% over the previous year; the net profit of the mother was 268 million yuan, a decrease of 24.12% over the previous year. In the first quarter of 2022, the company achieved revenue of 449 million yuan, a year-on-year decrease of 4.06%; the net profit returned to the mother was 51 million yuan, a year-on-year decrease of 48.3%.
Comment:
In 2021, the company's pea protein export business continued to soar, maintaining its core competitiveness during a period of worsening cost environments. In 2021, the company's pea protein revenue was 829 million yuan, an increase of 26.95% over the previous year. The increase was 4.9 and 21.43 percentage points higher than in 2020 and 2019, respectively, and growth accelerated markedly. The company's pea protein is mainly exported; in addition, some of its fan products are also exported. Accordingly, the company's export sales reached 936 million yuan in 2021, an increase of 21.88% over the previous year. It also maintained a high level, which was 7.08 and 11.11 percentage points higher than in 2020 and 2019, respectively. In 2021, the company's share of pea protein in the global market reached 40%. As high-end pea protein production capacity progresses, the company's global supply level will further increase, and product profits are expected to increase.
The company maintained a normal increase in fan sales in 2021. The company's new production capacity in Xichong, Sichuan will promote the high-end consumption of domestic fans. In 2021, the company's fan sales were 534 million yuan, an increase of 8.76% over the previous year. Compared with 2019 and 2018 before the pandemic, fan sales growth decreased by 7.71 and 4.79 percentage points, respectively. The pandemic has disrupted the operation of the restaurant industry, thereby affecting the sales of domestic fans. After the epidemic subsides, the boom in the restaurant industry will once again drive fan sales growth, and it is possible to return to double-digit growth levels in the future. In addition to normalizing consumption, the gentrification of fans is another opportunity for the company's fan business. The company's new fan production capacity in Sichuan aims to promote various upgrades of fan products. Upgrades will not only drive consumption in the fan market, but also increase the profits of fan products.
The company's dietary fiber sales continued to increase in 2021. In 2021, all core businesses, including dietary fiber, vermicelli, and pea protein, maintained a high level of sales growth, but the year-on-year increase in the company's overall sales declined due to declining sales of pea starch and other businesses. In 2021, the company's dietary fiber sales reached 157 million yuan, an increase of 21.71% over the previous year, maintaining the high growth trend since 2019. In 2021, sales of the company's two non-main businesses, pea starch and other businesses, declined year-on-year, reducing the overall increase in the company's current revenue.
In 2021, the company's profitability declined under cost pressure, as evidenced by a higher cost increase than revenue and a decline in various gross margins. After the second quarter of 2020, core prices of international peas, energy, and logistics all rose sharply. In 2021, the operating costs of the food manufacturing industry increased more than revenue, and profit levels generally declined. Since June 2020, international pea prices have risen by 20% to 40%; due to the rise in international food prices due to the Russia-Ukraine conflict, there is currently no downward inflection point in pea prices. However, the BDI price index has dropped 53.47% from its September 2021 high, and the logistics costs and shipping conditions of export companies are improving dramatically. In 2021, the increase in the company's various business costs far exceeded the increase in revenue, leading to a serious decline in product gross margin. Among them, the gross margin of pea protein fell 3.75 percentage points to 56%; fans' gross margin fell 4.4 percentage points to 4.46%; and the gross margin of dietary fiber fell 8.92 percentage points to 58.83%.
Investment logic: With the orderly recovery of daily life in export countries in Europe and the US, food and supermarket consumption is entering a good growth period. Overseas producers have strong support for pea protein demand. We believe that the increase in pea protein will continue. The recovery of domestic consumption depends on the development of the epidemic and the progress of the resumption of work, but the current consumption bottom is quite clear. Furthermore, although the cost of peas is still high, a downward inflection point in logistics and energy costs has already occurred. Generally, comprehensive costs are declining, which is helpful to the company's profits throughout the year. Under the dual logic of consumption bottoming out and costs peaking, we believe that a bottom in the stock prices of export-oriented food manufacturers has been formed. Finally, the recent sharp devaluation of the renminbi has further enhanced the profitability of export companies in 2022.
Investment rating: We forecast the company's EPS for 2022, 2023, and 2024 to be 0.25 yuan, 0.29 yuan, and 0.34 yuan respectively. Referring to the closing price on May 9, the company's price-earnings ratios will be 30.98 times, 26.79 times, and 22.76 times, respectively. We gave the company an “increase in holdings” rating.
Risk warning: The recovery in overseas demand fell short of expectations; pea costs have risen further.