The adjustment of business structure, the establishment of new retail channels and the decline in poultry prices affect the company's short-term performance Fengxiang issued a 2020 performance announcement: the company's annual income is 3.902 billion yuan (year-on-year-0.71%); net profit belonging to shareholders of listed companies is 153 million yuan (year-on-year-81.77%). In recent years, the company has accelerated its business transformation and gradually shifted from raw chicken products to deep-processed chicken products. Short-term focus on the pace of change in the proportion of the company's segment business, as of the 2020 annual report period, the company's business structure adjustment has been basically in place. In 2020, the company's deep-processed chicken sales revenue was 1.773 billion yuan, accounting for 45.5% (36.5% in 2019); raw chicken products revenue was 1.923 billion yuan, accounting for 49.3% (48.1% in 2019); and chicken seedlings and other business income accounted for 5.3%, down 10.1pct from 2019. In the process of transformation, the company has gradually established and clearly served the consumer market with brand products. Compared with the current market mainstream of rough and deeply processed chicken products, the company focuses on flavor conditioning chicken products, with both differentiation and strong bargaining power. We expect that with the adjustment of the company's business structure and the completion of the new retail channel, the company's future profitability and performance stability will be better than traditional poultry enterprises. However, from 2020 to 2021, poultry prices declined and raw material costs rose; coupled with the fact that the company's short-term marketing expenses for new retail channels will remain at a high level, the company's short-term profitability is expected to decline. According to this, we downgrade the 2021-2022 forecast and add the 2023 forecast. It is estimated that the 2021-2023 net profit of the company will be 3.5 million yuan, 60 million yuan, 870 million yuan, respectively (the previous forecast is 5.2 million yuan, the adjusted net profit in 2021-2022 is 5.2 million yuan), the corresponding EPS is 0.3 pound 0.4 pound per share, and the current stock price corresponds to 8.4 pounds 4.9 pounds, respectively. Maintain a "buy" rating based on the company's current low valuation.
The company actively layout new retail channels, "Youshape", "Fengxiang" brand income strong growth, product structure adjustment, channel construction first. In 2020, the company's new retail channel revenue was 793 million yuan (year-on-year + 214.2%), accounting for 20.3% of total revenue (6.4% in 2019). By the end of 2020, the company's offline channels have covered more than 30,000 high-quality convenience stores across the country. Online channels have reached strategic cooperation with Taobao, JD.com, Douyin, Kuaishou Technology and other platforms, and the sales revenue of online flagship stores has grown strongly.
In terms of brand products, in 2020, the "Youxing" brand income is 231 million yuan (year-on-year + 280.3%), and the "Fengxiang" brand income is 518 million yuan (year-on-year + 231.1%). The company's dual-brand advantage is gradually formed.
Risk tips: poultry prices are downward; the company's short-term marketing expenses are relatively high; China's ready-to-eat chicken breast market is in the initial stage of consumption and training, and the scale is still relatively small.