Zhongju Hi-Tech announced that it achieved revenue of 5.34 billion yuan in 2022, an increase of 4.4% over the same period, while the net profit of the mother was 590 million yuan, a decrease of 179.8%.

Key points of investment

Performance was in line with expectations, and profits turned negative as a result of litigation

In 2022, the company's revenue was 5.34 billion yuan (+4.4%), and net profit was -590 million yuan (-179.8%), mainly due to three joint lawsuits with industry, accounting for estimated liabilities of 1.18 billion yuan; excluding the impact of lawsuits, Guimo's net profit was 586 million yuan (-21%), mainly due to an increase in raw materials. 2022Q4's revenue was 1.39 billion yuan (-18.7%), mainly due to the impact of the epidemic, and net profit of the mother was -1.01 billion yuan (-369.4%). 2022 gross profit margin 31.7% (-3.2pct), net interest rate -10.4% (-25.7pct); 2022Q4 gross profit margin 31.7% (-6.8pct), net profit margin -72.3% (-95.1pct). 2022 Sales Expense Rate/Management Expense Rate/Financial Expense Ratio 8.9%/9.4%/-0.1%, same increase of 0.8/1.1/0.5pct, 2022Q4 Sales Expense Rate/Management Expense Rate/Financial Expense Ratio 9.9%/-0.2%, same increase of 3.3/4.1/-0.5pct.

Volume and price are growing steadily, and the development of other types of products can be expected

In 2022, revenue from soy sauce, chicken essence, chicken powder, cooking oil, and other products was 30.3/6.0/5.0/770 million yuan respectively, an increase of 7.0%/9.2%/1.9%/9.3%. 2022Q4 soy sauce, chicken essence, chicken powder, cooking oil, and other products increased by -4.1%/3.0%/2.6%/1.8%, respectively.

In 2022, the East/South/Midwest/North split revenue was 11.3/20.4/10.1/7.1 billion, an increase of 0.8%/7.0%/11.2%/12.6%. The revenue of the 2022Q4 company in the East/South/Midwest/North was 30/5.4/27/180 million yuan, an increase of -15.9%/-2.5%/9.2%/15.7%. In 2022, sales of soy sauce/chicken powder/cooking oil/other products were 50.3/3.2/3.2/129,000 tons, an increase of 5.2%/5.4%/-4.7%/3.2%; the ton price was 6016/18754/15649/5949 yuan/ton, an increase of 1.8%/3.6%/11.0%/4.9%. 2022Q4 saw a net increase of 60 dealers to 2003.

Profit forecasting

EPS is expected to be 1.02/1.21/1.41 yuan in 2023-2025. The current stock price corresponds to PE 38/32/28 times respectively, maintaining the “buy” investment rating.

Risk warning

Macroeconomic downturn risks, consumption recovery falling short of expectations, capacity construction or utilization falling short of expectations, controlling shareholder debt risk, etc.