Incidents:

The company achieved revenue of 2,743 billion yuan in the first half of 2018, an increase of 13.13% over the previous year; net profit attributable to shareholders of listed companies was 96.4433 million yuan, a year-on-year decrease of 5.08%. Among them, the second quarter achieved operating income of 12.14 yuan, an increase of 17.37% over the previous year, and the net profit of the mother of the mother reached 47.29 million yuan, an increase of 368.61% over the previous year.

Food and beverage business drives steady revenue growth

In the first half of this year, revenue from the company's food division increased 7.6%, and revenue from other segments increased 92%. The two segments contributed mainly to revenue growth. The revenue of the tea division and wine division was basically the same as last year, and the revenue of the grain and oil storage and transportation division fell 50%.

Beginning last year, Weiwei launched ready-to-drink soy milk drinks, packaged in two aluminum cans. Currently, they are available in Xuzhou and surrounding markets, and are expected to be further promoted to East China. Since the Weiwei brand is highly recognized by consumers, new products are more likely to be recognized by the market. We believe that the launch of new products is expected to change the weak demand for soy milk powder products and is expected to be the main contribution to performance.

Strengthen budget control and management, and gradually release profits

In the first half of this year, the company's net profit after deducting non-return income increased rapidly, mainly because the company strengthened budget control and management of various expenses. Sales expenses decreased by 19.64 million during the same period, and management expenses decreased by 16.84 million during the same period.

Looking at a single quarter, the 2018Q2 sales expense ratio was 7.35%, down 0.9 percentage points from Q1 and 3.22 percentage points from the same period last year. The management fee ratio for Q2 was 5.17%, down 0.4 percentage points from Q1 and 1.51 percentage points from the same period last year.

Share buybacks are used as incentives, and performance is expected to return to high growth

On August 18 of this year, the company issued a repurchase announcement. It plans to repurchase no less than 100 million yuan, no more than 334 million yuan of company shares. The repurchase price will not exceed 4 yuan/share (inclusive). All repurchased shares will be used for equity incentives. The company buys back shares at low stock prices and uses them to motivate management, which will stimulate management's enthusiasm and is expected to substantially boost performance.

Investment advice

In the future, the company determined development ideas focusing on its main business, and determined the three major business segments of “soy milk+food+liquor”. Previously, the company divested businesses such as coal mines and real estate, and subsequent development is worth paying attention to.

Risk warning

The company's promotion of new products fell short of expectations, management experienced major management flaws, food safety issues, etc.