2022H1's revenue / homing net profit is-3% compared with the same period last year, ranging from 37% to 380 million / 23 million yuan. Although the company raised the price of condensed milk-related products by 3% to 10% in January this year, the cost of raw materials such as large packets of powder and sugar exceeded the price increase, and the company's profitability declined. Income affected by the epidemic in East China declined in the first half of the year, while other regions maintained good growth.

2022H1's revenue / homing net profit is-3% compared with the same period last year, ranging from 37% to 380 million / 23 million yuan. 2022H1, the company realized operating income of 380 million yuan (year-on-year-3.1%), net profit of 23 million yuan (year-on-year) and non-return net profit of 18 million yuan (year-on-year). Among them, 2022Q2, the company's revenue was 190 million yuan (year-on-year-4.5%), the net profit was 11 million yuan (- 49.4%), and the non-return net profit was 9 million yuan (year-on-year). Under the influence of the epidemic, the company's quarterly revenue decreased slightly, the cost of raw materials such as large packets of flour increased, and the company's profits were under pressure.

The decline in trade business is a drag on the company's overall revenue, and operations in East China are greatly affected by the epidemic. 2022H1's income of concentrated dairy products was 250 million yuan, year-on-year + 13.2%, condensed milk price increase-sales volume increased steadily and cheese new products listed contributed to growth, dairy trade income 1.0 yuan, year-on-year-32.9%. The impact of the epidemic is expected to lead to the interruption of overseas dairy raw material supply chain, and the income of other products is 26 million yuan, + 78.2% year-on-year. Coconut milk volume continues to bring rapid growth to the business. For concentrated dairy products, the direct sales channel based on food processing achieved revenue of 21 million yuan, + 24.7% compared with the same period last year. The beneficiary company continued to open up new customer orders for food industry enterprises, and the distribution channel achieved revenue of 210 million yuan, + 5.2% year-on-year. 2022H1 company East China / South China / North China / other regions respectively compared with the same period last year-14.6%, 17.1%, 29.3%, 4.8%, respectively. Except for the shrinking income of East China affected by Shanghai epidemic control, all other regions achieved good growth.

The increase in cost exceeds the price increase of the company, and the profitability of H1 decreases compared with the same period last year; the increase in inventory is mainly due to the purchase and reserve of strategic raw materials. In the first half of the year, the price of overseas large packets of powder rose by ~ 20% and white sugar by 15%. Although the company launched a price increase of 3% to 10% for its main condensed milk products at the beginning of the year, the increase in raw material costs still exceeded the company's price increase, the company's profit side was under pressure, and the gross sales margin of 2022H1 was-2.6Pcts to 14.0% compared with the same period last year.

H1 company management rate year-on-year + 1.3Pcts/ financial rate year-on-year + 0.4Pct, the final company home net interest rate / deduction non-parent net interest rate year-on-year-3.3Pcts/-2.6Pcts to 6.0% soybean 4.8%. 2022H1 operates cash flow of-49 million yuan, while inventory is + 33.3% to 230 million yuan compared with the same period last year. This is mainly due to the continuous rise in the price of large packages of flour in the first half of the year, and the company has increased the purchase and reserve of large packages of flour prices.

Risk factors: food safety problems; intensified market competition; the company's new products & new market development is not as expected; raw material price fluctuation risk.

Investment suggestion: taking into account the large increase in raw material costs, lower the company's 2022 2023 EPS 2024 forecast to 0.55 pounds 0.75 pounds 0.93 yuan (the original forecast 0.64 pounds 0.91 pounds 1.15 yuan). With reference to the comparable company's 2022 PE (Hai Rong Technology 28x, Mioco Landuo 44x, based on Wind consensus expectations), taking into account the company's good growth in the next few years and the dominant position of the condensed milk industry, the company is given 40 times PE in 2022, corresponding to a target price of 22 yuan, maintaining the "overweight" rating.