1H22 performance is slightly lower than we expected.
The company's 1H22 income is 785 million yuan, year-on-year + 2.7%; net profit is 90 million yuan, + 2.0% year-on-year; of which 2Q22 revenue is 221 million yuan, year-on-year-16.2%, net profit 21 million yuan, year-on-year-21.8%. The company's performance is slightly lower than we expected, mainly because the epidemic situation in Shanghai and other places has a great impact on the sales of yellow rice wine.
Trend of development
The 2Q22 epidemic has a great impact on the core market in East China, and the upgrading process of sales volume and product structure is affected. under the resonance of the downward cost of raw materials and price increase at the cost end, the gross profit margin has reversed the momentum. Shanghai is the most affected by the epidemic in the company's core market (2Q21 accounts for 12% of revenue). 2Q22 Shanghai revenue was-80.2% year-on-year, while Jiangsu (11% of 2Q21 revenue) and Zhejiang (31% of 2Q21 revenue) were also hit to a certain extent. The epidemic led to the lack of consumption scene of yellow rice wine and the damage to the consumption power of medium and high-grade wine, and the revenue of medium-and high-grade wine in 2Q22 was-27.6% compared with the same period last year. Benefiting from the company's 4Q21 price increase measures and the downward trend in packaging costs, 2Q22's gross profit margin is 39.2%, year-on-year + 2.0ppt, and the cost-side pressure tends to slow down.
The company goes against the trend to increase marketing costs, continue to cultivate yellow rice wine consumer groups, and shape the brand image of high-end yellow rice wine. In the first half of the year, the company increased its expenses against the trend, and the rate of 1H22 sales expenses also increased by 0.3ppt, of which advertising and business promotion expenses were + 4.8% compared with the same period last year. High-end products such as Guyue Longshan and Guofeng 1959 series were comprehensively promoted in multiple dimensions, and consumer training was strengthened.
The company's national layout continues to advance, and it is suggested that we should pay close attention to the process of recovery after the epidemic. The company continued to promote the national layout in the first half of the year. In addition to advertising and publicity, the company continued to promote the construction of Shaoxing Yellow Rice Wine Industrial Park and the cultural connotation of deep yellow rice wine in the core market. According to the company announcement, the first phase of the project is planned to be completed before the end of the year; at the same time, the northern wine depot was opened to the public at the beginning of this year, and the company accelerated the opening of tasting halls throughout the country to continue to cultivate the domestic market outside Jiangsu, Zhejiang and Shanghai. We believe that with the continuous investment of the company, the yellow rice wine category is expected to make a regional breakthrough, and it is suggested that we should pay close attention to the recovery process after the epidemic.
Profit forecast and valuation
Taking into account the impact of the epidemic slightly exceeded our expectations, we lowered our 2022 Lexus profit forecast for 2023 by 3.5pm 9.7% to 234,272 million yuan. At the same time, taking into account the clear trend of consumer recovery, the target price is maintained at 10.40 yuan, corresponding to 2022, 23, 40.4, 34.9, and 34.9, respectively. The current stock price is traded at 37.6/32.4x2022/23, which has 7.5% upside compared to the current stock price, and maintains a neutral rating.
Risk.
The epidemic repeatedly affected the scene of alcohol consumption; other kinds of wine launched aggressively and continued to seize the market share of yellow rice wine; high-end competition intensified; food safety.
