Main points of investment:
The strategy of large items is becoming increasingly clear, and the commissioning of the new base is expected to accelerate performance growth affected by the three public consumption policies. the overall growth rate of the condiment industry has slowed down in recent years, and the industry competition has intensified. In line with the development trend of the industry, Canada launched the "large single product" strategy in 2014: by focusing on the development of resources, such as noodle fresh, original brewing, mid-plate food, tea and oil, the product structure has been continuously optimized. But until 2015, the company's revenue was constrained by capacity constraints and growth had been slow. At the end of 2015, the company's new production base in Changsha has been officially put into production, with an additional production capacity of 200000 tons, and the company's capacity constraints have been eliminated. We believe that the slight decline in soy sauce business in the first half of 2016 is mainly due to the closure of the old production base in Changsha, resulting in a reduction in the production of special soy sauce (low-quality soy sauce), which has a short-term impact on performance. In the long run, with the continuous promotion of the company's large product strategy and the improvement of the company's production capacity and production efficiency after the new production base is put into production, the company's future performance growth is expected to accelerate.
The company is expected to increase investment in KA channels next year, adding new impetus for performance growth. In the past, the company's products were mainly sold through circulation channels, and the proportion of KA and catering channels was very low.
In recent years, the company has paid more and more attention to KA channels; at the end of 2014, the company set up a special KA Division to expand KA channels, especially in Beijing, Shanghai and other first-tier markets. However, compared with the Haitian flavor industry and Zhongju Hi-Tech, the proportion of the company's KA channel is still small. We expect that as the company's policy gradually tilts to the KA channel, the investment in KA channel is expected to increase next year, which is expected to add new impetus to performance growth in the future.
Invest in the establishment of Hexing Fund, which is expected to achieve leapfrog growth through mergers and acquisitions in the future. in January 2014, the company invested 200 million yuan into Hexing Fund. According to the announcement, the purpose of establishing a partnership fund is to acquire or participate in target enterprises that meet the needs of the company's development strategy, and to achieve the purpose of industrial integration by means of mergers and acquisitions. But so far, the company has not carried out mergers and acquisitions. We expect that in the future, the company is expected to increase the extension driving force for the company's performance growth through mergers and acquisitions.
Earnings Forecast and Investment rating: for the first time, we give the company an "overweight" rating. We predict that the EPS in 2016-17-18 will be 0.140.17max 0.20 yuan respectively, corresponding to the 50.29max PE in 2016-17-18, which is 36.06 times. For the first time, we will give the company an "overweight" rating.
Risk hint: raw material price fluctuation risk, market expansion is not as expected.
