1H20's performance slightly exceeded our expectations.
The company announced 1H20 results: revenue was 9.4 billion yuan, down 1.6% from the same period last year; net profit was 330 million yuan, up 13.8% from the same period last year, slightly exceeding our expectations, mainly due to a slightly better-than-expected improvement in gross profit margin and 96 million yuan in compensation income from Coca-Cola Company in the first half of the year.
Trend of development
Soda recovery is the best, and income is expected to return to steady growth in the second half of the year. 1H20 was affected by the epidemic, and the company's income in various categories was affected by the epidemic to varying degrees, with the largest decline in February, with more than 50% of revenue back to growth in April, and 2Q20 revenue growth of about 7.4%.
The management said that the revenue in July was flat compared with the same period last year, and the catering and influence channels recovered well in August. In September, it is expected to benefit from the further recovery of school channels, and we expect the company's revenue growth to return to high digits in the second half of the year. According to the category, the volume and price of soda products rose in the first half of the year, mainly due to the introduction of household multi-support during the epidemic, as well as the promotion of sugar-free and mini cans, and the market share also increased slightly in the covered areas. Although the income of fruit juice and packaging water dropped by more than 15% in the first half of the year, the market share did not decline. Benefiting from the company's digital empowerment of channels and accelerating low-line market penetration, we expect revenue to return to steady growth in the second half of the year.
The diversification of products leads to the growth of income, and the launch of new products is accelerated. The company continues to focus on the marketing of sugar-free series, modern cans and other products, with revenue growth of more than 30% and 60% respectively in the first half of the year, driving the rapid growth of soda products. Chunyue, a 2-yuan water brand, also recorded a growth of more than 40%. At the same time, the company's coffee and tea categories also performed well in the first half of the year, with a year-on-year growth rate of about 50%. After the launch of new non-steam products in the first half of the year, Monster's revenue increased by 5%, showing a solid performance. The company has accelerated the pace of new product launches. Since the beginning of the year, there have been more than 10 million new products, including LIZHI INC-flavored tea, sunny lemon tea, fruity water, costa coffee and peach-flavored Maid Source, of which the size of Sunshine Lemon Tea and Peach-flavored Maid Source has exceeded 30 million yuan, and the overall contribution of new product revenue is higher than that of the whole of last year. We are optimistic about the company's long-term and steady growth prospects under the accelerated launch of new products and the prospect of high-end products.
Profit margins benefiting from raw material costs are expected to rise throughout the year. In the first half of the year, benefiting from the increase in average price and the low price of PET particles, the company's gross profit margin was higher than the same period last year, but it was offset by the increase in 4ppt of the expense rate, mainly due to the additional investment made by the company to accelerate market turnover and help dealers get rid of inventory during the epidemic, and the company also made more investment in the launch of new products. Management said that the expense rate in the second half of the year is expected to decline from the previous month, while considering that PET particle prices will still be good for the cost decline in the second half, we expect the overall net profit to improve significantly in the second half of the year, and the full-year profit margin may be higher than 2019.
Profit forecast and valuation
The company is currently trading at 12.4 times the 21-year price-to-earnings ratio of 2020 sterling. Taking into account the slightly better-than-expected improvement in gross profit margin, we raised our 21-year profit forecast for 2020 Universe by 6.7%, 5.0%, and correspondingly raised the target price by 5.6% to HK $3.8, corresponding to 18.8 picks 16.9 times the 21-year price-to-earnings ratio and 34% upside. Maintain an industry rating that outperforms.
Risk.
The price of raw materials rose sharply, and the epidemic was repeated in the second half of the year.