Intensified competition in the industry has led to short-term pressure on the company's tobacco label business income, the steady growth of color box business, and the sustained high growth of the new tobacco business is expected to become the company's second growth curve. Maintain the "overweight" rating.
H1 performance is slightly lower than expected, and the company's performance is under short-term pressure. The company's performance was slightly lower than expected in the first half of 2022 under the pressure of intensified competition in the industry and product structure adjustment. 2022H1/Q2 realized operating income of 2.64 billion yuan, compared with the same period last year, with a net profit of 2.0 million yuan and a net profit of 20.0 billion yuan, corresponding to 18.9%, 15.5% and-1.8/-4.9pcts, respectively.
Tobacco label business competition is fierce, income is under pressure. According to the data of the National Bureau of Statistics, 2022H1 China's cumulative cigarette production is + 2.5% year-on-year and + 0.9pcts year-on-year. We expect cigarette production to achieve low-and medium-digit growth for the whole year. 2022H1 cigarette label revenue of 1.1 billion yuan,-9.6% year-on-year, but 2022H1 cigarette label business gross profit margin rebounded slightly, year-on-year + 1.5pcts. The company's tobacco label business as a whole is affected by intensified competition in the regional market and repeated epidemics, both volume and price are under pressure, and tobacco label revenue is expected to be-5% in 2022 compared with the same period last year.
The growth rate of color box business has slowed down, waiting for volume to be released in the second half of the year. Under the background of repeated epidemic situation and weak downstream demand in the first half of the year, the growth rate of the company's color box business revenue slowed slightly. 2022H1's color box revenue was 560 million yuan, + 10.5% compared with the same period last year. We expect that in the second half of the year, with the sustained economic recovery and the recovery of downstream tobacco, alcohol and 3C demand, the expected color box business revenue in 2022 is expected to be + 25% compared with the same period last year.
The new tobacco business continues to expand, becoming the company's second growth curve. The company's early layout of e-cigarette business entered a period of volume growth, atomization e-cigarette and HNB co-drive development, 2022H1 company's new tobacco business revenue of 170 million yuan, + 298% compared with the same period last year. From July to August, the company has announced that its Yunshuo Technology and Yunpu Xinghe have respectively won the atomization production and contract manufacturing licenses of tobacco monopoly production enterprises. The national standard of "e-cigarette" will also be implemented on October 1, 2022. With the improvement of industry supervision, the industry will continue to develop healthily. We judge that there is room for stable and rapid growth of the company's new tobacco business in the future.
The overall rate is stable, and the equity incentive brings a slight increase in the management fee. The company's 2022H1 achieved an investment return of 45.25 million,-6% compared with the same period last year, which is basically stable; the company's 2022H1 sales / management / finance / R & D rates are 1.4%, 7.2%, 0.2%, 4.2%, respectively, and the overall expense rate is year-on-year + 2.1pcts. The main reason is that the management expense rate rises slightly due to the increase in equity incentive costs, and the overall rate is relatively stable.
Risk factors: weak demand for cigarettes and spirits; lower-than-expected box expansion; tighter new tobacco policies.
Earnings forecast, valuation and rating: the company is currently in the period of business structure adjustment, and it is recommended to focus on the rise of the new tobacco business. We have lowered our net profit forecast for 2022-23 to 1 billion / 1.07 billion yuan (original forecast:
1.26 billion / 1.55 billion yuan), the net profit forecast for 2024 is 1.1 billion yuan, corresponding to 0.68 EPS 0.73 for 2022-24. With reference to the company's past dynamic valuation center of about 15-20xPE, the target price was lowered to 11 yuan (original forecast: 14 yuan) to maintain the "overweight" rating.
