Core logic: The company is a leading flavor and fragrance company. Through the expansion of food ingredient businesses such as industrial chocolate and fruit products, it has gradually transformed into a comprehensive supply chain capable of providing product solutions. We think 22Q2 was a low point in performance and fundamentals, and it is expected that it will enter an upward channel in the future.
The driving factor that exceeded expectations: Exceeding expectations 1: The market believes that the market may define the company more as a leading fragrance company; we believe that the company is expected to become a comprehensive supply chain leader that can provide product solutions in the future, and there is plenty of room for long-term growth.
1) The company's edible flavors and flavors are already the company with the largest domestic investment. Big customers have abundant resources and stable cooperation, and are expected to become the leading international flavor and fragrance company in the future: 2) The chocolate business will become the largest domestic chocolate factory after being put into operation next year. Currently, the company's chocolate production capacity is 38,000 tons, and production capacity of 152,000 tons is expected to be released every year over the next three years; from the demand side, current orders are sufficient, large customer resources are stable, and new customer development is smooth. According to the customers where the company has now become a qualified brand supplier, the annual demand for chocolate production capacity is 200,000 to 250,000 tons. There is a lot of room on the side: 3) Although the jam business is in a period of business and personnel adjustment in the short term, the technical level and raw materials side have advantages, and there is still plenty of room for production capacity to be released. Thus, the collaboration between the company's food ingredient manufacturing business and the original flavor and fragrance business, combined with the company's own supply advantages, will help the company become a leader in providing comprehensive compound product solutions, with long-term growth.
Exceeded expectations 2: The market believes that the company's tobacco flavor business accounts for a relatively small share, and the subsequent contribution is not significant.
We believe that the company's tobacco flavor business has resources and technical advantages, and that it is expected that the e-cigarette smoke oil business with high profitability will exceed expectations in the future when it began deploying a highly profitable e-cigarette smoke oil business at the end of the year 21.
In the past, the company mainly used traditional cigarette flavors. The company's overall scale is expected to be over 100 million in '21. As a result, the company itself has certain resources, technology and customer advantages; the company laid out the e-cigarette smoke oil business at the end of 21, and it is expected that subsequent licenses can be implemented and orders will bring new business growth to the company; at the same time, gross net profit margins are higher than its original main business, which is expected to drive future exceeding expectations.
Catalysts: licensing of e-cigarette business, release of production capacity for food ingredients, etc.
Where is the current stock price (bottom/half empty)? Has that expectation been reflected? How many reactions have there been?
The company was affected by the epidemic in the second quarter. We think its operations and fundamentals were relatively low. Recently, there has been a correction in stock prices. We believe that the current stock price position is at the bottom, which does not fully reflect the expectations of subsequent businesses such as tobacco oil.
Profit forecast and valuation: The estimated revenue achieved in 2022-2024 was 35.50/40.24/4,597 million yuan respectively, 6.15%, 13.35%, and 14.24% respectively; the net profit returned to the mother was 1.50/192/249 million yuan respectively, and the year-on-year net profit was -20.29%/27.43%/24.68%, respectively, and the quality of operations improved. The EPS of 2022-2024 companies is expected to be 0.39/0.50/0.62 yuan, respectively, and the corresponding PE is 28.54/22.30/17.19 times, respectively.
What is the target price? How much space do you see at the current price? What is the basis for the calculation?
Considering that the company's current scale of edible flavors and flavors has become the largest domestic investment, the chocolate factory will become the largest chocolate factory in China after the release of production capacity in 23, giving leading premiums to certain manufacturers; at the same time, it is expected that the e-cigarette smoke oil business will contribute profits in 23. At the same time, considering the growth of the company's performance, the company was given 30 times PE in 23, corresponding to the target market value of 5.8 billion yuan. There is still room for 30%-40% of the current price.
Risk warning: The COVID-19 pandemic has repeatedly affected terminal demand, raw material costs continue to rise, etc.
