Main points of investment
Event
On March 20, the company announced its 2020 annual report. In 2020, the company achieved revenue of 2.094 billion yuan (year-on-year-4.16%), net profit of 1.18 billion yuan (year-on-year-4.45%), and non-return net profit of 1.057 billion yuan (year-on-year-5.44%). The company plans to distribute a cash dividend of 985 million yuan, with a dividend payout rate of 83.47%.
In 2020, the performance decreased slightly by 4.45%, and the daily flavor increased rapidly.
1) in 2020, the company's revenue decreased slightly by 4.16% compared with the same period last year, and the main products' edible flavors / food ingredients were affected by the fluctuation of downstream demand, with year-on-year-3.46% and revenue of 1.911 billion yuan (91.24% and 3.32%). Daily flavor grew rapidly, with revenue of 95 million yuan (4.52%), + 20.23% compared with the same period last year. The main contribution comes from the increase in sales of new products (the introduction of disinfection and sterilization products under the demand for anti-epidemic, cross-border development of new markets for environmental fragrance, etc.), the development of new customers in the North China market, and so on.
2) 2020Q4, the company achieved revenue of 652 million yuan (year-on-year-5.26%), net profit of 360 million yuan (year-on-year-10.44%), and non-return net profit of 334 million yuan (year-on-year-10.02%). The main reason for the lower growth rate of net profit than income growth is the Q4 sales expense rate + 2.39pct (to 8.61%, a profit reduction of about 16 million yuan).
The company's HNB flavor products have been trial-produced overseas, and the reserve technology is ready to be developed. 1) the company's HNB technology is expected to open 2-5 times the growth space and explore atomized tobacco flavor business: the company has developed flavor products suitable for HNB tobacco products and formed a relevant sample database and database. According to our estimation, 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%), the company will benefit most from being the leader of domestic tobacco flavors. At present, the company's HNB flavor products have been trial-produced overseas, if the domestic HNB tobacco products are licensed, the company is expected to open 2-5 times the growth space. At the same time, the company began to gradually distribute the domestic atomized e-cigarette field, and in 2020, new atomized e-cigarette customers such as RELX, pomelo YOOZ, MYLE, etc., atomized e-cigarette products to achieve preliminary sales, the future is expected to bring incremental performance.
2) the planned annual production capacity is about 33000 tons to support 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). The company continues to dig deep into the business of edible flavors and vigorously develop food ingredients and special medical food business.
The brand has strong potential energy and sustained high investment in research and development.
1) the core technical team is strong, and the R & D investment continues to be high: Ms. Zhu Linyao, the controller of the company, has been ploughing the flavor and fragrance industry for more than 30 years. At present, the company has a team of first-class perfumers in the industry (89 professional perfumers). Among them, 49 are deputy senior and senior perfumers, and 211 R & D technicians are able to meet customers' various needs for flavor products in time. The company has a total of 10,000 and 169patents (116invention patents and 53 utility model patents) recognized by the state as the technology center of the enterprise and has established the company's industry influence; the company's R & D expenditure in 2020 is 154 million yuan, accounting for 7.33%. Continued high investment.
2) Brand power has accumulated for 24 years and has rich customer resources: the company has ploughed the flavor industry for 24 years and owns 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 has set up a joint venture with tobacco customers to bind large customers deeply.
3) High dividend rate and high dividend yield are attractive: benefiting from a solid market position, the company has a substantial dividend rate (the annual dividend payout rate reached 210% on 18-19-20). The high dividend yield is attractive (at the closing price on March 19, the dividend yield is 3.54%), which exceeds the level of 3.24% of the ten-year bond yield, providing good medium-and long-term returns.
Investment suggestion
The company is the leader of China's flavor industry, the brand potential is strong, HNB technology is expected to open the company 2-5 times the growth space, research and development continues to be high investment, reserve technology ready to go. It is estimated that the company's net profit from 2021 to 2023 will be 12.28 yuan 12.81 / 1.344 billion yuan, a growth rate of 4.07%, 4.31%, 4.92%, corresponding to a valuation of 22.66pm 21.73max 20.71 times (market value 27.8 billion yuan) on March 19.
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