Incident: The company released a performance forecast. The company's net profit after deduction is expected to be between 11 million yuan and 130 million yuan in 2020, an increase of 507.30%-617.71% over the previous year, and performance growth will be high. As of December 31, 2020, the remaining equity repurchase claims of Zhongyu Capital are still in the public auction stage. The estimated reduction amount for the remaining claims is 36 million yuan to 63 million yuan. As a result, the net profit returned to the mother is between 60 million yuan and 80 million yuan, an increase of 78.86%-138.48% over the previous year.
Taken together, we think there are 2 factors driving performance growth: product power+channel strength.
Product strength: The company's products focus on the meat industry and develop three major businesses, namely ham, specialty meat products, and personalized branded meat. At the same time, the company tested new products, tried Chinese food again, and continuously broadened the consumption scenario. 1. Product structure optimization. On the basis of ham, the company continued to expand its business fields and entered the meat market. The personalized branded meat business grew rapidly. The volume of the traditional meat products business was basically close to that of the ham business. The product structure continued to be enriched. The user base for sausages, bacon, bacon, sauce, branded meat and other products was widely used. The consumption frequency was high, the market space was large, and the production cycle was short, effectively expanding the company's revenue scale, smoothing the off-peak season phenomenon, improving operational efficiency, and enhancing profitability. 2. New product research and development results are obvious. In 2020, Q4 launched new products such as Pyramid Hot Pot Ham, Pyramid Beef Hot Pot Ham, Pyramid Low Temperature Sausage, and Pyramid Bacon, with a focus on cultivating mass consumer hits. The hot pot ham is the first in the industry and is on the hot pot circuit. It mainly targets hot pot chain brands and household consumption. It has both a consumer base and demand, and is expected to bring growth. Low-temperature sausages focus on the low-temperature process and position themselves in the high-end sausage market. Pyramid bacon uses modern technology to enhance traditional products to provide users with safer and higher quality products. 3. Product competitiveness continues to increase. As a traditional meat product brand enterprise, the company makes full use of the advantages of the supply chain and the advantages of using its own raw materials to build an internal industrial chain with branded meat as upstream and meat product processing downstream to improve comprehensive utilization rates and continuously strengthen product competitiveness.
Channel strength: Build online marketing sales channels and continuously improve the sales network. The company expands online marketing channels, covering social e-commerce, live streaming of influencers, content e-commerce, fresh e-commerce, etc., and the proportion of online sales continues to increase, cultivating the user base and consumer stickiness. In addition to consolidating Taobao's Tmall and Jingdong stores, the company is actively deploying platforms such as Youzan Mini Program, Pinduoduo, Community Group Buying, and Spending to keep up with market trends and launch new channels. The company's online sales in 2019 were 75.5946 million yuan, an increase of 44.24% over the previous year; in the first half of 2020, online sales were 92,725,600 yuan, an increase of 112.78% over the same period last year, exceeding the whole of 2019. In the future, it is expected to rely on its continuous expansion and innovation of online channels to become a young, high-frequency consumerized Internet FMCG brand. At the same time, the company is also actively consolidating and enhancing the offline market, strengthening cooperation with customer channels such as restaurant chain brands, food processing enterprises, supermarket stores, etc., and the service group and market coverage are constantly expanding.
Profit forecasts and investment suggestions: The company continues to test new products, experiment with Chinese styles, and enter the hot pot circuit with new products. The number of online channels is clearly being launched, and channel construction has been improved. The company's procurement has advantages and is expected to smooth out costs. The company's net profit in 2020 is expected to be affected by the amount deducted from remaining debt, but operating profit increased rapidly, focusing on the rapid development of the main business. We believe that in recent years, the company will enter a period of rapid performance development. The company's revenue for 20-22 is expected to be 7.67, 12.76, and 1,824 billion yuan respectively, and net profit of 0.71, 227, and 301 million yuan, EPS is 0.07, 0.23, 0.32 yuan respectively, and the corresponding PE is 69, 22, 16X, giving a “recommended” rating.
Risk warning: trade frictions, large fluctuations in pork purchase prices, new product sales falling short of expectations, slowing channel development and quantity of development falling short of expectations, asset impairment losses, uncertain effects of the epidemic, food safety issues, etc.
