Main points of investment
Event
On October 28, the company announced that it would report three quarters in 2020. 2020Q1-Q3, the company realized revenue of 1.443 billion yuan (year-on-year-3.65%), net profit of 819 million yuan (year-on-year-1.60%), and non-return net profit of 723 million yuan (year-on-year-3.18%).
Q3's performance is stable, waiting for HNB space to open
1) 2020Q1-Q3, the company's revenue is 1.443 billion yuan (year-on-year-3.65%), the return net profit is 819 million yuan (year-on-year-1.60%), and the non-return net profit is 723 million yuan (year-on-year-3.18%). The gross profit margin / net profit margin is 75.99% and 56.81% respectively (year-on-0.07pct/+2.13pct).
2) 2020Q3, the company's revenue is 507 million yuan (year-on-year-2.74%), the return net profit is 274 million yuan (+ 3.52%), and the non-return net profit is 253 million yuan (- 0.08%). The main reason for the company's faster growth than revenue growth is that the sales expense rate decreased by 1.76pct (to 4.80%, increasing profit by about 95 million). The gross margin / net profit margin is 74.56% / 53.96% respectively (year-on-year-2.50pct/+6.44pct).
The company continues to develop HNB flavor products, which is expected to open 2-5 times the growth space. 1) HNB technology is expected to open 2-5 times the growth space of the company: the company has developed flavor products suitable for HNB tobacco products, forming a relevant sample database and database. According to our estimates, the amount of flavor used by HNB new tobacco products is about 6-10 times that of traditional tobacco. If the domestic penetration rate of HNB tobacco products reaches 25% 50% in the future (according to the State Tobacco Administration, the penetration rate of Japanese HNB tobacco products in 19 years is about 23%), it will benefit most as the leader of domestic tobacco flavors. if domestic HNB tobacco products are licensed, it is expected to open 2-5 times the growth space. 2) the planned annual production capacity is about 33000 tons, supporting the company's growth: at present, the company has an annual operating capacity of 15600 tons, of which the annual production capacity of edible flavors / food ingredients / daily flavors is 1.27 million tons. In the future, it is planned to have an annual production capacity of about 33000 tons (22300 tons of food ingredients, 7700 tons of food flavors and 3000 tons of special medical food). We will continue to cultivate the business of edible flavors and vigorously develop the business of food flavors and ingredients.
High dividend ratio and high dividend yield are attractive, core technical team is strong 1) High dividend ratio and high dividend yield are attractive: benefiting from a solid market position, the company has a substantial dividend yield (210% and 99% in 18 / 19), a high dividend yield (3.97% at the closing price on October 27) and a 0.75pct premium over the 10-year Treasury yield of 3.22%. Provide good medium-and long-term returns 2) Brand power has accumulated for 24 years, with rich customer resources: the company has ploughed the flavor industry for 24 years, with Tianhong, Huabao, Peacock and other brands, well-known customers include China National Tobacco Corporation, Pepsi, Shuanghui, Jiaqia, Yanjin store, Baicao flavor and so on. At the same time, the company sets up a joint venture with tobacco customers to bind large customers deeply. 3) the core technical team is strong, paying attention to R & D and building technical barriers: Ms. Zhu Linyao, the controller of the company, has been ploughing the flavor and fragrance industry for 30 years. At present, the company has a team of first-class perfumers in the industry (including 67 professional perfumers. Among them, 41 are deputy senior and senior perfumers) and 183 R & D technicians, which can meet the various needs of customers for flavor products in time. The company pays attention to R & D investment, and has tens of thousands of flavor formulations and 134 patents (109 invention patents and 25 utility model patents) recognized by the state. The company's R & D expenditure in 2019 is 165 million yuan, accounting for 7.53%, compared with the same period last year. + 9.88% 2020Q1lam Q3 R & D expenses 102 million yuan, accounting for 7.08%.
Investment suggestion
The company is the leader of China's flavor industry, ploughing the flavor industry for 24 years, high dividend rate and high dividend yield are attractive, the core technical team is strong, HNB technology is expected to open 2-5 times the growth space of the company. It is estimated that the company's net return profit from 2020 to 2022 will be 1.455 billion yuan (1.455 billion yuan), with a growth rate of 5.09%, 5.59%, 6.12%, corresponding to a valuation of 23.62, 22.37 and 21.08 times (market capitalization, 33.3 billion yuan) on October 27.
Risk hint
Major adjustment risk of dividend policy; risk of landing schedule of HNB licensing policy; risk of loss of confidentiality of core technologies and formulations