Events: (* without special notes, 1. The currency units listed in this article are all in RMB; 2. As the company changed its fiscal year end date in December 2018 from March 31 to December 31, therefore, the "compared with the same period" period is a comparison of "6 months ended June 30, 2019" and "6 months ended September 30, 2018" data. ) the company issued an interim results announcement for the six months ended June 30, 2019. During the reporting period, the company's revenue from continuing business reached 2.069 billion yuan, an increase of 25.29% over the same period last year; operating profit was 806 million yuan, an increase of 13.36% over the same period last year; and net profit returned to its mother was 480 million yuan, an increase of 0.66% over the same period last year.
Flavor sector: revenue remains stable, listed Sun Company mainly deals in tobacco flavors to ensure high profitability
As of mid-2019, the sector achieved revenue of 967 million yuan, an increase of 0.2% over the same period last year, accounting for 47% of the total revenue, a decrease of 12pct compared with the same period; operating profit of 581 million yuan, an increase of 11.62% over the same period, accounting for 72% of the total operating profit, a decrease of 1pctEBIT of 60.07% over the same period, and an increase of 6pct over the same period. The sector's revenue is mainly contributed by Sun Company Huabao (300741.SZ). In the first half of 2019, the company achieved revenue of 976 million yuan, an increase of 1.90% over the same period last year, of which revenue from edible flavor was 886 million yuan, down 0.77% from the same period last year. The gross profit of the sector reached 81.78%, an increase of 0.83pct over the same period last year. On the whole, the performance of this sector of the company shows a high correlation with the development trend of the downstream industry, among which 1) the cigarette industry associated with tobacco flavor is in the process of structural adjustment, showing a steady decline in sales and an increase in taxes and profits. the company is ready to supply new tobacco products; 2) the food and beverage industry associated with food flavors maintains a steady growth trend, with an average growth rate of about 5% in sub-areas. 3) in the daily chemical industry related to daily flavors, soaps and detergents show a downward trend, while cosmetics, new retail and social e-commerce still have growth potential driven by new business models.
Tobacco raw materials: Zhuli's new domestic tobacco opportunity to open up overseas tobacco sheet market
By mid-2019, the sector had achieved revenue of 366 million yuan, down 14.93% from the same period last year, accounting for 18% of the total revenue, or 8pct less than the same period; the operating profit was 132 million yuan, down 29.04% from the same period last year, accounting for 16% of the total operating profit, 36.07% from the same period, and 7pct was reduced from the same period. In this plate: 1) in terms of tobacco flakes, the overall performance of the plate is greatly affected by the decline of domestic cigarette production, cigarette structure optimization, and industry sheet overcapacity. The company has responded to this challenge by expanding overseas markets, and overseas sheet sales and sales are on the rise compared with last year's report. At the same time, the company's R & D and marketing team are ready for the development of heated non-combustible tobacco products, which will help the company improve its performance when regulation permits; 2) in terms of new cigarette materials, the revenue of popping beads has declined due to fierce competition in the industry. benefit from the company's leading advantage, its profits remain stable.
Incense raw materials: the production project is gradually put into production and the product structure is continuously optimized, and the growth ability of the plate is being highlighted.
As of mid-2019, the sector achieved revenue of 359 million yuan, an increase of 57.33% over the same period last year, accounting for 17% of the total revenue, an increase of 4pct over the same period; operating profit of 64 million yuan, an increase of 85.87% over the same period, accounting for 8% of the total operating profit, an increase of 3pctEBIT of 17.69% over the same period, and an increase of 3pct over the same period. The growth of the department is mainly due to the commissioning of Jiangxi Xianghai Phase I project and the optimization of the existing product structure. The company is currently building incense raw materials production projects also include 1) Jiangxi Xianghai Phase II (expected mass production in the second half of 19 years), 2) Phase 3 has started construction, 3) Yongzhou Shanxiang is under construction of new equipment and optimize the production line, we believe that with the continuous release of incense raw material production capacity, the performance of this sector is expected to maintain an upward trend.
Condiment: the potential of the new company is released, and the efficiency of resource integration and optimization helps to improve the performance.
As of mid-2019, the sector achieved revenue of 376 million yuan, an increase of 1304.30% over the same period last year, accounting for 18% of the total revenue, an increase of 17pct over the same period; operating profit of 104 million yuan, an increase of 1197.65% over the same period, accounting for 13% of the total operating profit, an increase of 14pctEBIT of 27.57% over the same period and an increase of 57pct over the same period. The increase in the department's performance comes from the consolidated performance of Jiahao Foods, a newly collected company, for six months. At present, the company integrates Jiahao Food with the company's existing resources by adjusting product structure, brand and sales channels and human resources, and the performance of the department is expected to improve with the deepening of integration.
Profit forecast and investment suggestion
We estimate that from 2019 to 2021, the company will achieve a revenue of 44.28 million yuan and a net profit of 2.545 billion yuan. Based on the company's leading advantages and R & D strength in China's flavors and fragrances, its scale advantage and leading position in the field of flavor and tobacco raw materials, as well as the steady growth of new seasoning business, we maintain a "buy" rating.
Risk tips: market development is not as expected, policy risk, international trade risk, food safety risk
