Core viewpoints

With the gradual recovery of the domestic economy, downstream demand further picked up in the third quarter, and revenue returned to positive growth smoothly. From a sub-business point of view, the sales recovery of kitchen food business in catering and food processing channels is better, with a large increase in sales, while the recovery pace of household demand is expected to be relatively stable. The company's feed raw materials and oil technology business has also been significantly repaired, in addition to sales growth factors, the prices of some products have also improved. In terms of profitability, gross profit margin benefited from a significant increase in the downward cost of raw materials, which led to the repair of the company's profitability when the expense side was relatively stable.

Event

The company released its third quarter 2023 report:

During the reporting period, the company achieved operating income of 188.522 billion yuan, an increase of 0.36% over the same period last year; net profit of 2.129 billion yuan, down 9.53%; and non-return net profit of 909 million yuan, down 59.75% from the same period last year.

In Q3 single quarter, the company achieved operating income of 69.809 billion yuan, an increase of 2.12% over the same period last year, a net profit of 1.163 billion yuan, an increase of 208.42% over the same period last year, and a net profit of 895 million yuan, an increase of 643.15% over the same period last year.

Brief comment

Market demand improved month-on-month, revenue returned to positive growth

With the gradual recovery of the domestic economy in the third quarter, the downstream demand for the company's products has further picked up. Although the prices of some products have fallen, the growth in sales has finally led to an improvement in overall revenue performance on a month-on-month basis and a smooth positive growth. Specific sub-business, during the third quarter, the company's core kitchen food business sales recovery in catering and food processing channels is good, the sales side has a large increase, while the recovery pace of household demand is expected to be relatively stable. At the same time, the company's feed raw materials and oil technology business sector also showed relatively obvious repair in the third quarter. In addition to sales growth factors, the prices of feed raw materials such as soybean meal and some oil technology products also increased. Finally, promote the sales end to achieve better growth.

Downward costs boost gross margins and profitability is repaired

The company's 23Q3 gross profit margin of 5.75%, year-on-year / month-on-month increase in 2.72/2.64pcts, the improvement is mainly due to the downward cost of raw materials and the increase in the prices of some products. Among them, as far as the kitchen food sector is concerned, after the high-priced wheat inventory was consumed in the first half of the year, the cost gradually returned to normal, making Q3 company flour and by-product business profitability improved. On the other hand, the feed raw material and oil technology business has benefited from the increase in product prices. In terms of expenses, the company's 23Q3 sales / R & D / financial rates were-0.04/+0.01/-0.04pcts year-on-year, the management rates were the same as the same period last year, and the overall cost side remained stable. Finally, driven by gross profit growth, the company's 23Q3 homing net interest rate increased to 1.67% year-on-year / month-on-month, and profitability improved.

The main business responds to the evolution of market demand, and the new business advances steadily.

In the face of the increasingly diversified market demand, as a leading enterprise in the grain and oil field, the company covers multi-category products and permeates diversified channels through a comprehensive brand matrix, and has a high market influence. In terms of product innovation, the company's edible oil business has not only launched high-end flavor products, but also made great efforts to create a "zero reverse" product series focusing on the concept of health, to meet the differentiated and healthy consumer demand. In terms of rice business, the company has also launched a "six-step fresh" series of rice through technological innovation to increase the freshness of rice and create differentiated products. In addition to the main business of grain and oil, the company has been extending to condiments, central kitchens and other businesses around the kitchen food field in recent years. In terms of condiment business, the company has gradually cut into the market by cooperating with Maruzhuang and preparing to build its own factory. On the other hand, the central kitchen project realizes the resource sharing and cooperation between upstream and downstream enterprises in the industrial park through the operation mode of the industrial park, and launches the corresponding prefabricated food products according to the local characteristics, constantly enriches the product layout and excavates the business increment. In the medium to long term, the layout and landing of the new business will help the company achieve steady growth in the kitchen food sector.

Profit Forecast:

Combined with the latest financial report of the company, we lowered our previous profit forecast and estimated that from 2023 to 2025, the company will achieve an income of 2672, 2955 and 319 billion yuan, and a net profit of 32.68,46.23 and 5.924 billion yuan, corresponding to 0.60,0.85,1.09 yuan per share. If the equity incentive fee is restored, it is estimated that the net profit from 2023 to 2025 will be 33.81,47.04,5.964 billion yuan, corresponding to the EPS of 0.62,0.87,1.10 yuan per share.

Risk Tips:

1) the risk of rising prices of raw materials such as soybeans: direct materials account for a relatively high proportion of production costs in the condiment industry, and the prices of staple agricultural products such as soybeans have fluctuated greatly in recent years, which has a great impact on the company's profits. if the follow-up raw material prices continue to rise further, it will have a negative impact on the company's performance. 2) Food safety risk: condiments are used frequently and widely in production and life, which are directly related to people's diet health. if relevant food safety incidents occur, it will reduce the public trust in the company's products. it has a significant adverse impact on the company's business. 3) the risk of demand recovery is less than expected: at present, the company's operation is still subject to the recovery process of downstream demand, if the demand recovery is not as expected, the company's operating performance will still face some pressure in the short term.