Huang Shanghuang (002695) Research Briefing： Rice Products Business Carding Affects Medium-Term Revenues and Leisure Halogen Products Stores Continue to Accelerate Development
Huang Shanghuang (002695) Research Briefing: Rice Products Business Carding Affects Medium-Term Revenues and Leisure Halogen Products Stores Continue to Accelerate Development
Key points of investment: Rice products business sorts out short-term impact on 2019 mid-term earnings, but increases the profitability of this part of the business. The company’s rice products business is mainly related to the core business of the subsidiary Jiaxing “Zhenzhenlao” and Jiaxing “Zhenzhenlao”Since the company was acquired by Huang Shanghuang in February 2015, in recent years, the overall operating performance of the “True Old” company has performed well.
“True Old” company’s operating income from 1 in 2015.
562.6 billion to 3 in 2018.
51.78 million yuan, three-year compound strength 31.
06%, net profit from 1406 in 2015.
740,000 yuan, increased to 2151 in 2018.
250,000 yuan, 15-year compound strength 15.
The company’s second-quarter revenue growth rate was 8.
31%, lower than market expectations, mainly due to the decrease in the company’s rice product business in mid-2019.
Analysis of the reasons is mainly because Zhenzhen Laolao adjusted product structure and some e-commerce channels in order to improve the gross profit level of product sales, sorting out some products with poor profitability.
By actively cutting off some non-profitable businesses and products, although the operating income of rice products has declined slightly in the short term, the profit level has 重庆耍耍网 increased.
In the middle of 2019, “Zhen Zhen Lao Lao” achieved a net profit of 2764.
79 million yuan, a year 2018 net profit of 1885.
30,000 yuan, an increase of 46 in ten years.
“Zhenzhenlao” dumplings and other products are of good quality and affordable, mainly in the high cost-effective market. In recent years, they have developed further in the supermarket and group buying channels and have grown rapidly. We expect that there will still be relatively good growth space in the future.
The management system and strategic positioning have been readjusted. The rapid development of stores has promoted the growth of performance. Huanghuang went public in September 2012. Due to the relatively conservative internal management system and unclear strategic development goals, it has been quiet after the listing until 2016.Poor performance.
The board of directors was re-elected in September 2017, and the son of the former chairman, Chu Jun, was elected as the new chairman.
After being elected as Chairman of the Board, it was clear that Huang Shanghuang should accelerate development, and follow the “elite taste” of the industry boss as the reference.
In terms of executive incentives, talent introduction and store development, it is more pragmatic and aggressive, and has introduced many positive and effective policies and measures.
With reference to wind data, the annual salary of executives has increased substantially in 2017 and 2018.
At the same time, in the “2019 Annual Director and Senior Management Remuneration Plan” announced by the company in March 2019, the company clearly stipulated that the salary of senior executives before the tax of 960,400,000 yuan / year, continued to increase significantly.
In addition, in June 2018, the company also provided decentralized incentives to executives and core management and technical personnel. Some executive incentives were calculated at the exercise cost price of nearly 10 million yuan.
Under the high incentives, the company brought in excellent talent from the outside and its morale increased.
Increase the number of 1,000 stores in 2018 (the total number of stores reaches more than 3,000). In 2019, it is expected to enter the number of 1,000 newly opened stores, replacing the closed stores, which is expected to increase the number of 800 stores.
In the next few years, we expect the company to still be able to add 800-1000 stores each year.
In terms of store opening strategy, the company also changed the past model of directly opening street stores. Instead, it opened high-potential energy stores in airports, high-speed rail, highway service areas, supermarkets, and shopping mall complexes.High, high-efficiency, which is also more conducive to the establishment and promotion of “Huang Shanghuang” brand, the foundation for the smooth opening of the street store merger.
Market expansion area. In 2019, in addition to the sinking of channels in mature markets, it is also expected to focus on the development of Yungui River, Jiangsu, Zhejiang and Shanghai, and Henan, Shandong and other regions.
With the accelerated development of stores, the company’s sales scale has expanded, raw material procurement costs and logistics and distribution costs, as well as sales expenses, management expenses and other interim expenses are gradually reduced, and the overall profitability promotes continuous improvement.
The price of raw materials has benefited from the “reverse pig cycle”. The main raw materials for leisure brine products companies will continue to decline in the next 2-3 years: chicken by-products and duck by-products.
According to the company’s announcement, the cost of raw materials accounts for about 60% of the company’s main business costs; the main raw materials of meat duck, duck feet, duck wings, duck neck and beef account for about 60% of the main business costs.
Our research found that the prices of chicken by-products and duck by-products “reverse the pig cycle”, because pork supply has decreased and pig prices have risen. Consumers are looking for alternatives to poultry consumption such as chicken and duck meat, which has led to an increase in chicken and duck breeding and chicken and duck byproductsSupply has increased, and chicken and duck by-products mainly use leisure brine products. The demand for leisure duck products is relatively stable. With the increase in supply, the prices of chicken and duck by-products have fallen.
This round of pig cycle is profoundly affected by “African swine fever”. It is expected that the increase in pig prices will be excessive than in the past, and the time for the rise in pig prices cannot be compensated.
In particular, up to now, both the pig and sow inventory have continued to decrease, so the price of chicken and duck by-products may fall more than expected, and the downward channel may also be possible.
The decline in the cost of raw materials is reflected in the company’s product gross profit margin, which is also continuing to rise.
Gross profit margin for the first quarter of 2019 was 38.23%, it is estimated that the gross profit margin in the first quarter of 2018 increased by 2.
Gross profit margin for the second quarter of 2019 was 36.
64%, about 2% increase in gross profit margin in the second quarter of 2018.
Earnings forecast and investment rating: Maintain “Buy” rating. We believe that Huang Shanghuang has transformed the company’s management mechanism, aggressive marketing, and popularized product positioning. There are many blank markets in China, and there is a lot of room for future growth. We are optimistic about the company’s future development.
The company’s EPS for 2019/20/21 is predicted to be 0.
78 yuan, corresponding to 28 in 2018/19/20 PE.
81 times, maintain “Buy” rating.
Risk reminder: the store development progress is not up to expectations; the single store revenue is reduced; the duck by-product prices are not up to expectations; market competition is intensified; food safety; capacity expansion is not up to expectations; the macroeconomic downturn.