Main points of investment:
2016 results are in line with expectations:
Zhongyi's revenue reached 1.63 billion yuan in 2016, up 6% from the same period last year. Net profit was 145 million yuan, up 70 per cent from last year. The main reason is that there are one-time financial expenses and exchange losses in 2015. Zhongyi has been on the market for ten years, and its income has continued to grow, with a compound growth rate of 11.8%.
Incense raw materials are still the main source of income, and the growth rate of natural products is obvious:
The company's aroma and flavor products recorded 1.025 billion yuan in 2016, an increase of 5% over the same period last year, accounting for 62% of the revenue. Gross profit was 269 million yuan, up 12% from the same period last year. With the efforts of the enterprise group, natural products have made the distribution of upstream resources and contributed to the development of the industry. in 2016, the income was 353 million yuan and the gross profit was 64 million yuan, an increase of 21% over the same period last year.
The spice industry chain is developing downstream:
Zhongyi in the rapid growth of oil-based incense raw material products, and downstream development, has begun to provide solutions for important customers, condiment products to face the central kitchen.
Gu Lei officially started construction, and the application side is worth looking forward to:
Construction of the Goure project began in the second half of 2016 and is expected to be completed and put into production in 2019. 350 million yuan will be invested in 2017. In the future, Gu Lei will coordinate the supply chain of natural and oil-based resources, and the company will also develop C5 series of functional materials. Zhongyi has set up an application platform laboratory and won the support of international expert groups.
Maintain a highly recommended rating:
We continue to be optimistic about the steady growth of the company's existing business, the rapid development of natural essential oils and the future layout of applications. We expect EPS 0.3HKD in 2017, corresponding to PE 5.6, to maintain a strong recommendation and a target price of HK $2.61.