Event

The company publishes its three quarterly results for 2016

In the first three quarters of 2016, revenue reached 1.339 billion, an increase of 5.05% over the same period last year; the net profit of returning to the mother was 128 million, an increase of 10.15% over the same period last year; and the net profit of non-return was 116 million, an increase of 21.86% over the same period last year. Revenue in the third quarter was 377 million, an increase of 2.8% over the same period last year, and the net profit returned to the mother in the third quarter was 29.9047 million, an increase of 192.52% over the same period last year.

Brief comment

The steady growth of revenue in the first three quarters still benefited from the first quarter.

The company's revenue reached 1.339 billion in the first three quarters, up 5.05% from the same period last year, and slightly increased by 2.8% in the third quarter alone. Among them, the overall growth rate of soy sauce is about 4% and 5%, and that of vegetable oil is about 10%.

The company's large single product strategy, the two major single noodle fresh, original brewing sales are basically the same as last year, noodle fresh growth is in line with expectations, the growth is better than the original brewing.

The surge of homing net profit in the third quarter was from a low base in the same period last year.

The company's net profit increased by 10.15% in the first three quarters compared with the same period last year, 21.86% after deduction, and the investment income (time deposits and wealth management products) decreased by 110 million in the third quarter alone. The year-on-year increase in the company's net profit in the third quarter was 192.52%, mainly due to the company's recognized loss on equity investment in the same period last year, and the net profit in the third quarter of 2015 was-32.32 million, with a low base. To sum up, the growth rate of return net profit is lower than that after deduction.

The alternating influence of new and old factories gradually eliminates the gross profit margin and increases.

In the first three quarters, the overall gross profit margin was 28.14%, down 1.04 pct from the same period last year; the gross profit margin in the third quarter was 28.91%, an increase of 1.35pct over the same period last year, although the increase was small, but it reflected that the company was gradually eliminating the negative impact on gross profit caused by the replacement of new and old factories and the transition of production capacity. At present, the old factory has stopped production, and the new factory is gradually increasing its capacity, which has not been fully utilized; the original 120,000 tons of the old factory has all been converted to the new plant, and the product quality of the company is also gradually improving, with a new production capacity of 200000 tons. Considering the different fermentation cycles of soy sauce, the wrong production will basically be able to achieve 400000 tons in the future. If the new plant can be fully produced in the future, the gross profit margin will also be raised.

Sales expenses continued to decrease in the first three quarters and increased significantly in the third quarter.

The company's sales expenses fell by 17.54% in the first half of the year and 8.16% in the first quarter compared with the same period last year, resulting in a decline in overall sales expenses in the first three quarters of 2016, but an increase of 22.8% in the third quarter alone. On the one hand, the increase in sales expenses in the third quarter is mainly in the promotion of vegetable oil, the company has expanded the circulation channels of vegetable oil market and realized part of the channel sales in Sichuan and Hubei except Hunan and Jiangxi; on the other hand, the super cost of soy sauce stationed in the first line is the source of the growth of other sales expenses.

Profit forecast and valuation

The company's condiment business is flat at the industry average, and vegetable oil is being invested more vigorously. At the end of the year, we will see the entry of the company's front-line merchants. The convertible bonds issued by the company entered the stock conversion period on October 28, 2016. According to the current exchange price of the exchangeable bonds, the upper limit of the number of shares to be exchanged is 127 million shares. At that time, the controlling shareholders of the company may reduce their holdings due to the excellent investment of the company's controlling shareholders. The three-year issuance period of the exchangeable bonds, on the one hand, locks the future stock exchange price, stabilizes the company's market capitalization, actually replenishes the company's funds, and improves its financing capacity, on the other hand, it also lays the foundation for the company's future capital operations such as mergers and acquisitions. Forecast 2016/2017EPS0.15, 0.20 yuan, increase the rating, do not give the target price.