Event: on July 1, the company issued a reply to "Please do a good job in preparing for the meeting of the non-public offering Development and Review Committee of Epp Spice Group Co., Ltd."
Early accumulation has entered the harvest period, industrial chocolate, jam downstream order growth, gross profit margin rebounded, it is proposed to increase production and further expand market share. 2017-2020 is the accumulation period of the company's food ingredient manufacturing business, gradually improving in sales channels, product matrix, production process, customer stickiness and other aspects, with a certain popularity in the industry. In 2021, the efficiency of market development has improved, the demand of downstream customers has increased, the volume of sales has increased, and the proportion of 21Q1 food ingredient manufacturing business revenue has increased to 20%, which is expected to further increase for the whole year. Specifically, 1) on industrial chocolate, Hangzhou Tianshun has significantly enhanced its client competitive advantage by virtue of its leading domestic production capacity and localization services. The utilization rate of 21Q1 capacity has increased to 97%, and the gross profit margin has rebounded to 17.79%. 2) in the jam products business, the profitability is under pressure due to factors such as increased depreciation of new production lines, increased staff costs, and low gross profit margin to maintain major customers. At this stage, when the harvest period is entered, the utilization rate of 21Q1 capacity is increased to 85%, and the gross profit margin is increased to 17.24%. The company plans to raise no more than 750 million yuan, all for industrial chocolate and jam production expansion and research and development projects, if the smooth landing will provide strong support for the expansion of market share.
Flavors and fragrances have brand power, and "compound" products under business synergy are the future development direction.
The company is one of the well-known enterprises in the domestic flavor and flavor industry. "Aipu" has brand recognition, and the customers of flavor and flavor are basically the same as those of food ingredients manufacturing and trade. the implementation of horizontal expansion strategy is conducive to further enhance customer stickiness. In the future, the company will shift from single food ingredients and flavors to providing comprehensive compound products, including chocolate + various chocolate flavor flavors, fruit products + various fruit flavors, etc., the new R & D center will also enhance the service ability to provide customers with comprehensive food ingredients and flavor solutions, thereby enhancing the overall business scale and market competitiveness of the company.
Investment advice: with the rise of food ingredients, the company's layout in the chocolate and jam industry is expected to seize the industry dividend, and the increase in production capacity will expand its leading position in the industry. We expect the company to achieve EPS0.86, 1.22,1.60 yuan in 2021-2023, corresponding to PE22x, 15x, 12x, and maintain "buy".
Rating.
Risk tips: uncertainty of overseas epidemic situation; intensified competition in the industry; progress of the fixed increase program is not as expected; downstream demand is lower than expected; food safety issues.
