I. Overview of events

The company released its quarterly report for 2017, with operating income of 1.359 billion yuan in the first three quarters of 2017, an increase of 1.47% over the same period last year, net profit of 129 million yuan, an increase of 0.71% over the same period last year, and earnings per share of 0.11 yuan. In the third quarter alone, the operating income was 383 million yuan, an increase of 1.44% over the same period last year, and the net profit was 29 million yuan, down 1.41% from the same period last year.

II. Analysis and judgment

Revenue improved in the third quarter compared with the previous quarter, thanks to the "two-wheel drive" marketing strategy, the company's revenue increased by 1.47% year-on-year in the first three quarters, 1.44% in the third quarter alone, and improved in the second quarter (revenue fell 0.91% in the second quarter). This is mainly due to the fact that the company put forward the "two-wheel drive" marketing strategy of soy sauce and vegetable oil last year, firmly grasped the general trend of upgrading consumption of condiments, and relied on the company's strong dealer system, the business of soy sauce and vegetable oil maintained steady growth. in particular, vegetable oil has achieved a leading market position in Hunan and Jiangxi, and is likely to become a new growth point in the future.

Gross profit margin returned to 28%, and sales expense rate increased.

The company's gross profit margin returned to 28% in the first three quarters, which was reduced due to the increase in the proportion of vegetable oil revenue with low gross margin. After the company adjusted its marketing strategy, the proportion of high-end soy sauce increased, especially "original brewing".

Growth is more optimistic. The sales expense rate in the third quarter was 8.3%, an increase of 6% over the first half of the year, mainly due to the change in the company's marketing strategy, the delivery of goods caused by the large product strategy and the increase in promotion costs.

The new factory releases part of its production capacity and promotes the upgrading of the company's product structure.

The new plant will gradually undertake the production capacity of the old plant. Due to the relatively backward technology and equipment of the old plant, the new plant with a capacity of 200000 tons will gradually enter the stage of capacity release, and at the same time, the production capacity of the old plant will be gradually eliminated. The production technology and equipment of the new factory are more advanced, which can comply with the current trend of consumption upgrading and complete the upgrading demand of the company's product structure.

Third, profit forecast and investment suggestions

As a first-line condiment enterprise, benefiting from the upgrading of consumption, the company's condiment business has developed steadily. We estimate that in 17-19, the revenue will be 2.325 billion yuan, with a growth rate of 10%, 12% and 14%, respectively, and the net profit will be 2.13 million yuan, 13.6% and 22.3%, respectively. The EPS is 0.15, 0.18 and 0.23 yuan, respectively, and the corresponding PE is 4335, 28X, respectively. The value of 45-47X is given, and the corresponding estimation range is 6.75-7.05 yuan, with a "highly recommended" rating.

Fourth, risk tips:

Market sales are not as expected, raw material prices fluctuate, food safety problems.