Events:
Longda Food issued an announcement: 2022 achieved operating income of 16.116 billion yuan, year-on-year-17.39%, net profit of 75 million yuan, loss of 659 million yuan last year, of which 4Q22 realized operating income of 4.664 billion yuan, year-on-year + 17.13%, net profit of 26 million yuan, loss of 986 million yuan last year, 1Q23 realized income of 3.477 billion yuan, year-on-year + 4.09%, net profit of 0.21 million yuan,-9.56%.
Main points of investment:
The proportion of the food sector continues to increase, and the slaughtering and aquaculture sectors are firmly supported: 1) look at the products:
The company's revenue from fresh frozen meat / cooked food products / prepared vegetables / import trade / other products was 120.3, 3.37, and 1.610 million respectively, compared with the same period last year. 12.57, 11.23, and 93.81%, respectively. During the reporting period, the company focused on the food sector, persisted in promoting the development of prefabricated food business, and quickly served the market with a large item strategy. The revenue of the food sector reached 1.652 billion yuan, an increase of 7.10% over the same period last year, and the revenue share of the food sector increased from 7.90% to 10.25%. The slaughtering and breeding sectors, as the two wings of the food business, provide a stable supply of raw materials. During the reporting period, the company slaughtered 5.8936 million heads, and the breeding business met the traceability requirements of major customers. During the reporting period, the number of live pigs was 501200, an increase of 25.65% over the same period last year. 2) look at it through different channels:
The company's distribution / direct sales respectively achieved revenue of 1.2746 billion yuan, 29.10% compared with the same period last year. The company adheres to the national layout and defines the channel operation mode based on large customer channels, focusing on expanding the distribution network of small and medium-sized customers and developing franchisees as a supplement. In 2022, there were more than 500 professional dealers of prefabricated dishes, and the sales of the company's major customers increased well, including Fujian Yurong, Sunan ingredients, Shanghai Xinbohai, Yonghe King and other major customers. 3) Q1 company's revenue increased slightly in 2023, and we believe that with the recovery of the catering scene after the opening of the epidemic, the company's prepared food business maintained rapid growth in the first quarter.
Improved profitability and stable cost rate: 1) in 2022, the gross profit margin was 4.03%, year-on-year + 2.16pct, in which fresh frozen meat / prepared vegetables were 1.74%, 10.43%, + 0.27/+1.38pct, respectively, and the sales / management / R & D expense rates were 1.07%, 1.66%, 0.05% and-0.15pct/+0.19pct/+0.01pct, respectively, with a net profit rate of 0.47% and + 3.84pct.
In the first quarter of 2023, the company achieved a gross profit margin of 4.67%, year-on-year + 1.02pct, and a net return of 0.61%, year-on-year-0.08pct. The company's expense rate is relatively stable and its profitability has improved compared with the same period last year, which we believe is mainly due to the economies of scale of leading enterprises and the contribution of the prefabricated food sector. 2) Q1 company's profits are under pressure in 2023, which we believe is mainly due to losses in the breeding sector caused by the decline in pig prices, insufficient pork consumption expectations and the advance of the Spring Festival leading to the advance of downstream stock preparation to the end of 2022.
Profit forecast and investment rating: the company adheres to the overall development strategy of "one body and two wings" and has years of professional accumulation in the food industry. we are optimistic about the company's strategic focus and the advantages of product research and development, supply chain integration and key customers formed by the deep ploughing industry. We estimate that the company's 2023-2025 net return profit will be RMB 0.78 million, corresponding to a PE of 266 million times that of 116-44-34, with the first coverage and a "overweight" rating.
Risk hints: the risk caused by macroeconomic fluctuations, the risk of food safety, the risk of repeated epidemic, the risk of intensified market competition, and the risk of pork price fluctuation exceeding expectations.