Continue to develop and innovate in categories to counter economic downturn and industry pressure. Since 2017, the company has continued to work hard on curry products, which has become a new growth point for the company. Since 2018, the company has been producing big health food through OEM, mainly 5 types of probiotic solid drinks, expanding the company's products into multiple categories. 2019 was a year full of opportunities and challenges for the condiment industry. Under the economic downturn and the pressure of transformation and upgrading of the condiment industry, Anji Foods' total revenue in the first half of the year increased first in the condiment industry, but gross sales profit was still at a low level in the industry due to market development and other factors.
Revenue and net profit have both increased, and e-commerce, overseas, and Tecom channels are making concerted efforts. The company's 2019H1 revenue was 209 million yuan, an increase of 35.14%; net profit attributable to shareholders of the parent company was 28 million yuan, an increase of 33.16% over the same period. The increase in revenue was mainly due to increased sales revenue from e-commerce, overseas, and Tecom channel customers.
The five major sectors are being promoted simultaneously, striving to achieve the 19-year business goals. The main work to be carried out in the first half of 2019:
(1) The condiments sector adopts a “two-pronged” strategy of channel expansion and market penetration.
(2) Big health food sector: The private brand “TOMODS” health food is officially launched.
(3) Strive to develop overseas markets. Overseas revenue in the first half of the year was 5.2511 million yuan, an increase of 117.31% over the same period.
(4) Optimizing internal management.
(5) Implement capital raising investment projects: a 1:1 Tetra Pak flavoured bone soup product production project with an annual output of 10,000 tons; a production project with an annual output of 700 tons of edible fungus extract and 1,625 tons of by-products.
Deepening the condiment sector, curry is expected to become a new growth point. Anji's main product, compound seasoning powder, accounts for more than 60% of its revenue. In the new business, revenue from curry products is growing rapidly, which is expected to become a new growth point for Anji.
Profit forecast: Under the complex and changing external environment and economic downturn pressure, the growth rate of the semi-annual report is in line with expectations, so we maintain our profit forecast. Revenue for 19/20/21 is expected to be 420,59,765 million yuan, with growth rates of 24%, 40%, 30%, respectively; net profit is 0.60,0.89,130 billion yuan, a growth rate of 52%, 48%, 46%; EPS is 0.26,0.38 yuan and 0.55 yuan/share, respectively. Based on considering that the old business has stabilized and that large single products of curry have been released, there are potential opportunities for probiotics to be released, and the future is positive. We think the company will be more flexible in the future, maintain its purchase rating, and give it 31 times PE in 20 years, with a target price of 11.78 yuan, or 16% room.
Risk warning: food safety risks; developing overseas markets falls short of expected risks; declining industry sentiment