2020 performance is in line with our expectations
The company announced its 2020 results: revenue 17.2 billion yuan, + 0.4% year-on-year; net profit 500 million yuan, + 19.4% year-on-year, in line with expectations, and the dividend payout rate for the whole year rose to 50%, exceeding expectations.
2H20 income was + 3% year-on-year, of which soda growth rate returned to 4.8%. 2H20 income performance was still affected by the epidemic on beverage consumption, so fruit juice and water still recorded a 2.6% drop of 7.2%. 2H20 net profit was + 32.1% year-on-year, mainly due to the low price of PET particles, raising 2H20 gross profit 2.9ppt year-on-year, proper expense rate control, cost rate savings compared with 1.5ppt, and strong net profit performance in the second half of the year.
Trend of development
Actively promote category upgrading, high-end item performance is eye-catching. Driven by the trend of upgrading consumption such as non-sugar and health, the company has actively promoted the upgrading of various sub-sectors in recent years. The sugar-free and fiber + series in the soda plate grew by nearly 50% in 2020, driving the steady growth of the category under the influence of the epidemic; 2 yuan of water Chunyue recorded double-digit growth in the whole year, accounting for 20% of the income; and in terms of packaging upgrading, the series of high Maori modern cans and mini cans continued to sell, and the growth for the whole year was also very strong. In recent years, category and packaging upgrading has become one of the main drivers of the company's revenue growth, and we believe that the high-end trend is expected to continue to promote the company's long-term steady revenue growth.
The promotion of new products has been fruitful, and the category of essays is expected to make efforts. In recent years, the company has accelerated the process of launching new products, and the new products launched last year have a strong performance, with 5 models selling tens of millions of products, including peach juice, Costa coffee, sunny lemon tea, LIZHI INC soda, fruit water and so on. Management said that based on the new products launched in the past two years, the new product revenue accounted for nearly 15% in 2020, and contributed to about 3% of the overall revenue growth, the company's new product promotion was very effective. We expect that this year, Costa coffee and other new products are expected to continue to develop into 100 million yuan products by increasing the distribution rate of the channel. Affected by the epidemic last year, Monster achieved single-digit growth and performed steadily, and we expect high-speed growth to return to this year as the consumption scenario recovers. The company plans to continue to expand new products this year to further enrich the product matrix, such as 1Q21's launch of AHHA light soda and pure soda. We are optimistic that the company will continue to expand the growth prospects brought by new categories while consolidating the competitive advantage of strong categories.
Full-year revenue is expected to achieve double-digit growth, cost upward profit margins under short-term pressure. Management said that year-to-date revenue achieved high single-digit growth compared with 2019. We expect to benefit from the launch of new products and channel recovery, the company's revenue this year is expected to achieve double-digit growth at a low base, making a good start to the 14th five-year Plan. The company expects revenue to maintain a compound growth of medium and high units in the next 3-5 years. Since the beginning of the year, the price of PET particles has risen significantly, which may cause short-term pressure on the company's gross profit margin. The company plans to partially hedge the cost pressure by continuously upgrading its product structure and integrating the supply chain.
Profit forecast and valuation
The company currently trades at a price-to-earnings ratio of 13.9 times 2021 for 22 years. Considering the short-term pressure on the cost upside profit margin, we cut our profit forecast by 11.3% and 10.2% for the year 2021. Keep the target price unchanged at HK $3.8, corresponding to the price-to-earnings ratio of 17x16x2021Universe 22 and 14% upside. Maintain an industry rating that outperforms.
Risk
Raw material prices rose higher than expected, competition intensified and demand was weak.
